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Markets: Surprised By Record Gold Rise? It may be the beginning, Dec

The speed with which gold crossed the $ 2,000-an-ounce threshold has raised some fear in the market about a correction, but many analysts predict more profit as the coronavirus crisis prompts investors to buy the relative security that awards the ingot.

The rebound to record levels, which pushed gold to $ 2,055 on Wednesday, has made the precious metal one of the best-performing assets in 2020. The metal has risen $ 500 this year and $ 200 in the years alone. last two weeks.

Exceeding the $ 2,000 psychological barrier forces investors to change their benchmarks, said Frederic Panizzutti of Swiss precious metals firm MKS. “The adjustment will be greater. We are definitely in a bull run. ”, Held.

A wave of hoarding has fueled the rebound. Investors added 922 tons of gold worth $ 60 billion at current prices to their stocks in exchange-traded funds this year, according to the World Gold Council.

Investors see gold as an asset that should hold its value as the health crisis and central banks’ printing of money erode the value of other assets.

US Treasury yields, in normal times, a safe asset that is much more popular than gold, have dropped to minus 1.07% from 0.15% earlier in the year, making bullion seem like a better bet. .

The dollar, another rival to gold as a safe asset and the currency it trades in, has fallen to two-year lows as the coronavirus infects more Americans.

With central banks keeping interest rates low and pumping money into the markets, even a rebound in the economy, which would normally see money go from bullion to more productive assets, would help the metal, said Carsten Fritsch, analyst at Commerzbank.

This is because rising inflation expectations would further push real bond yields.

“Ultimately, with gold you can’t print anymore, you can’t artificially create. It will keep its value ”said Michael Hewson of CMC Markets. Bank of America predicts that gold could reach US $ 3, 00 in 18 months.

But not everyone is convinced. The demand for gold in Asia has collapsed due to confinement measures and high prices seem exaggerated for many, at least in the short term.

“This is a short market, not looking for a rise”said Gianclaudio Torlizzi of T-Commodity, adding that prices could, probably after a correction, rise to $ 2,300, but are unlikely to advance further.

“The insurance that gold provides to an investor’s portfolio has become very expensive”said Carsten Menke, analyst at Julius Baer.

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