Gold price of USD 2,000 per ounce within reach

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A lower dollar, aggressive monetary policy easing, ultra-low interest rates, negative US real yields, fiscal stimulus and the technical outlook are pushing gold prices to an all-time high. And the stars are aligned for it to continue to rise. Georgette Boele even believes that USD 2,000 per ounce is within reach.

In the current favourable investment climate for gold prices, the psychological threshold of USD 2,000 is within reach now. There are several reasons for this, precious metals specialist Georgette Boele asserts in her latest publication “Focus on gold”.

Firstly, since the start of July the US dollar has fallen. The dollar is not a ‘safe haven’ right now and in addition, investors are shying away from it because of the tensions between the US and China and the upcoming presidential elections. Moreover, the handling of the Covid-19 situation in the US has weighed on the US dollar. Finally, the monetary easing by the Fed is a crucial driver of dollar weakness.

Secondly, central bank policies are driving gold prices up strongly. Official rates are close to zero in a large number of countries and they’re unlikely to go up in our forecast horizon.

Thirdly, interest rates are negative in a number of countries (official and/or government bond rates). Gold doesn’t bear interest. So negative rates are another major support for gold prices especially versus the euro.

Fourthly, the US may not have negative official interest rates or government bond yields, but nominal rates corrected for inflation expectations (real yields) are in negative territory. 

A fifth reason is that governments have embarked on large-scale fiscal stimulus efforts to support the economy. As a result, fiscal deficits have risen substantially in a large number of countries. This development has made some investors nervous, especially in combination with the substantial monetary stimulus measures being taken. As a result, investors have bought gold. They’re concerned about the possibility of higher inflation in the future.

Finally, the technical outlook is positive. Investors saw every dip in gold prices as a buying opportunity. Now the psychological resistance to USD 1,800 per ounce has been overcome and the all-time high of USD 1,921 has been surpassed the major psychological threshold of USD 2,000 per ounce is within reach. 

You can read more about the economy, commodities and sectors in ABN AMRO’s Insights 

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