More analyses pointing to new record high in price of precious metal
Last week, gold crossed the key price level of $2,000 dollars an ounce as markets weighed up the possibility of continued suppression in interest rates along with the weaker dollar. But as impressive as that record is, some forecast an even shinier future for the haven metal.
One prediction, put forward by RBC Capital Markets, has gold crossing the $3,000-per-ounce mark by the first quarter of next year. In a commentary released last week, RBC cited demand tailwinds including the COVID-19 public health crisis, economic turbulence, and extremely accommodative monetary policy.
“Gold continues to step into its role as a perceived safe haven quite well,” the report said. “On top of that, with gold prices rocketing to all-time highs, gold’s outright price gains have made it a star assets of 2020, arguably appearing more popular than ever.”
RBC’s forecast allowed for a low-price scenario of $1,739/oz, which had a 10% chance of coming to pass early next year. The base case, assigned a 50% probability, has gold easily surging past the $2,000/oz mark in the first quarter next year, then eventually settling down to $1,801 by the fourth quarter.
The third scenario, just slightly less likely at 40%, is for gold to break through the $3,000/oz barrier due to economic turbulence that “proliferates into an even deeper crisis.”
Also making a $3,000 call for the price of gold is Jan van Eck, heir to the first U.S. gold fund launched in 1956. As reported by MarketWatch, his firm is calling for gold to touch the lofty target of $3,400 an ounce amid real negative rates in many countries, the current deflationary environment, and unprecedented central bank stimulus worldwide.
Bank of America shared a similar picture of the future last Tuesday. It shared a summary of a call between its chief investment strategist and the heads of its commodities, rates, and technical strategy teams, which culminated with a consensus view that gold is enjoying strong support and could rise to $3,000 per ounce within 18 months.
As reported by Axios, the group cited the “astonishing and breathtaking” level of monetary and fiscal stimulus unleashed worldwide, reaching $20 trillion in all and amounting to around 20% of global GDP. In conjunction with that is the likely continuation of central banks’ gold-buying activity.
Metals strategist Michael Widmer said the trajectory for gold hinges on the value of the greenback and U.S. real interest rates.
Collectively, the analysts said gold is seeing a sustained boost as the pandemic brings on an assortment of economic effects including vast capital destruction, declining productivity, rising public debt levels, and falling equilibrium real interest rates, among others.
“In addition, we believe that a clouded geopolitical chessboard further supports the case for our $3,000/oz forecast over the next 18 months,” they said.
