Gold prices continue to rise, Goldman eyes $2,300/oz price target

‘Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.’

Gold price rallies as uncertainty continues to plague markets

Gold has rallied over 30% this year, with Spot Gold last trading at US$1,976 per ounce, according to Bloomberg Data. While the precious metal dipped alongside equity markets in March, investors have poured into gold – both spot and futures – over the last few weeks, as hopes of an easy economic recovery evaporates, uncertainty increases and the coronavirus pandemic intensifies.

Despite their efforts, governments across the globe are struggling to contain the fat-spreading virus, with global cases recently passing 18 million. Indeed, while many high profile pharmaceutical companies – including Pfizer, Moderna and AstraZeneca – are all rushing to produce a vaccine, the results so far, though promising, have proven to be far from definitive.

In spite of these concerns, like gold, equity markets have also risen over the last month, with the tech-heavy Nasdaq Composite adding 2.99% or ~300 points in that period. This comes after the FANG cohort delivered a strong beat on analyst expectations last week, with Facebook, Apple and Amazon obliterating analysts’ quarterly revenue estimates.

Large-cap gold miners have also seen their share prices run up over the last month, with Newmont Mining Corp, Barrick Gold and Newcrest Mining all up.

Goldman Sach’s US$2,300 per ounce price target

Despite the 30% run-up so far this year, analysts continue to see upside from gold, with analysts from Goldman Sachs last week raising their price target on the precious metal to US$2,300 per ounce from US$2,000 per ounce. The blue-chip investment bank argued that as real interest rates potentially sink lower, gold is likely to become a more attractive investment.

‘With more downside expected in U.S. real interest rates, we are once again reiterating our long gold recommendation from March.’

‘Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows,’ Goldman analysts said in a note.

Beyond that, the investment bank further stressed that with US government debt levels hovering around record highs, there are ‘real concerns around the longevity of the U.S. dollar as a reserve currency have started to emerge.’

Other analysts have given more outlandish price targets on the precious metal, with best-selling author Jim Rickards arguing that gold will hit a US$15,000 per ounce before 2025.

Speaking to Kitco News, Mr Rickards reasoned that: 'If you just take the average of the prior bull markets: 1971 to 1980, nine years, 2200%, 1999 to 2011, a twelve-year bull market, about 700%. Just take the average, you don’t have to go to the higher of the two or extrapolate, if you just take the average of the two you would say the next bull market is going to be a little over 10 years and it’s going to go up 1500%.'

Spot gold was at US$1,967 per ounce; while gold futures traded at US$1,993 per ounce, at the time of writing.

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