As economic uncertainty looms on the horizon, gold is gaining more interest among consumers across the world.
Gold recently cleared $1800 and is now starting to raise speculation that the commodity could break $2,000 by 2021.
Kitco covered the prognostications of one individual who believes that gold could hit this target by next year.
In a report released on July 9, 2020 Georgette Boele, precious metal strategist at ABN AMRO, believes that gold’s prospects look good heading into 2021.
She believes that gold prices will close out at near $1,900 an ounce by the end of 2020. On top of that, Boele believes that by the end of 2021 gold will be at $2,000 per ounce.
“Now the psychological resistance of USD 1,800 per ounce has been surpassed. It seems that investors will only be satisfied if the former peak in gold prices at USD 1,931 per ounce is reached and taken out. Above that the important psychological level of USD 2,000 per ounce is within reach,” she declared in the report.
However, she noted that the market could still face a short-term correction.
“Speculative positions are substantial and positions in ETFs are at an all-time high. If investor sentiment deteriorates, some of these positions will likely be closed,” she stated. “This will cause higher volatility in gold prices. We still expect a sizeable correction in gold prices in a risk off environment when the dollar is back in favor.”
Boele stressed the importance of investors focusing on the long-term and not getting fazed by short-term corrections.
“It is likely that this correction will be short-lived and be a buy-on-dips for investors eagerly waiting to step in,” she said.
Boele affirmed that gold will continue to be attractive to investors as a safe-haven asset due to the low interest rate policies pushed by central banks and the fiscal recklessness of governments across the globe.
Even though the Federal Reserve is not expected to implement negative interest rates, Boele claimed that real rates are already in the negative and could drop even further as inflation risks accelerate.
“As long as there are expectations that the Fed would move to a form of yield curve control, the upside in U.S. Treasury yields is limited,” she stated.
With economic uncertainty looming on the horizon, people naturally turn to the most proven commodity — gold — in order to protect their wealth.
If the U.S. takes its easy money policies to the next level, dollar confidence will likely fall, thus making gold as a solid insurance policy.