MarketWatch recently interviewed analysts about the price development of gold. There is both cautious and bold optimism in the air for record price developments this year and next.
Gold's performance in the weeks following the Covid-19 pandemic has been anything but excellent. There has been volatility in the price, and a temporary decline was seen before the price rose again to its highest since 2012.
The precious metal has been pulled in two directions, from safe-haven expectations to a source of cash to cover losses in the stock market.
“The outbreak of Covid-19 has had a significant impact on the gold market, causing massive price swings as investors react to the developments of the pandemic,” says Steven Dunn, head of the ETF department at Aberdeen Standard Investments.
“Due to Covid-19, refiners shut down their operations... and moving gold from one place to another became challenging as conventional means of transport became nearly impossible,” he says.
The WHO declared Covid-19 a pandemic on March 11, but the price of gold did not immediately rise as many expected, even though the blow to the global economy was evident with schools and businesses closing around the world.
However, gold has risen 15% this year compared to a 14% drop in the S&P 500 index.
“The price of gold is reaching new record highs compared to most currencies, except for the US dollar, which is the strongest of the fiat currencies,” says Jeb Handwerger, editor of Gold Stock Trades.
“If the aftershock caused by the Covid-19 virus is indeed a much deeper and wider iceberg beneath the surface of the economy, I believe we will then see the buying pressure for gold intensifying.”
— Adam Koos, Libertas Wealth Management Group
It is hard to imagine the economy thriving in the remaining year, and for that reason, Koos expects to see an increase in the price of gold.
He is not keen on predicting records, but sees “a greater likelihood” of prices rising to record highs rather than falling back toward the $1500 per ounce price by the end of the year.
However, Peter Grosskopf, CEO of the asset management company Sprott, believes prices will exceed previous records. “We are closely monitoring the trading of bars and technical analysis, most of which indicate that the price of gold will rise above $2000 at some point this year or early next year,” he says.
“At every level, there is too much debt. We have borrowed from the future, and our economy cannot pay it back. This equation requires a lot more economic support, and gold is a great hiding place from that process,” he says.
There is also an opportunity developing in the gold mining sector. “Now is a great time to buy gold stocks that were sold alongside general stocks to cover margins” last month, says Grosskopf. “Their margins are going to be at record levels.”
Translated and shortened from MarketWatch's original English article
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