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Gold prices could hit $5000 and beyond amid major macroeconomic headwinds

The precious metal has climbed more than 16% over the last six months, with analysts believing gold prices could soar above $5000 an ounce as investors flock to the safe haven assets amid the myriad of macroeconomic headwinds.

The precious metal has climbed more than 16% over the last six months, with analysts believing gold prices could soar above $5000 an ounce as investors flock to the safe haven asset amid a myriad of macroeconomic headwinds.

In May, Thomas Kaplan, founder of Electrum Group, a New York-based asset management firm, told Bloomberg that he believes gold prices will rally to as high $5000 per ounce and potentially even higher ‘depending on macro circumstances’.

Central bank intervention will help gold prices rally

Earlier this month, Dan Popescu, Investment Research Consultant and gold and silver analyst, spoke with IGTV's Jeremy Naylor to discuss his forecast for gold, who said that the global economy faces a potential reset of the monetary system.

Popescu believes that in the next five years gold prices could break above $5000 due to the coronavirus pandemic and other macroeconomic factors has ‘created an explosion of government debt’.

This incredible intervention by central banks will devalue the US dollar, euro and sterling, which in turn will help drive up the price of gold, he added.

Gold consolidates below Fibonacci resistance

Gold has managed to rebound back towards the 76.4% Fibonacci resistance level as stock markets take a more positive turn, according to Josh Mahony, senior market analyst at IG. Ultimately we need to see a break through the $1743-$1744 resistance zone to bring about a bullish breakout signal.

‘Until then, there is a chance we could roll over to continue the trend of the path of lower highs that has been in place throughout the past month,’ Mahony added. ‘As such, the ability to reverse lower or break through this 76.4% Fibonacci level at $1734 will tell us a lot about where we go from here.’

Investors believe stock market is ‘overvalued’

According to a recent survey carried out by Bank of America (BofA), 98% investors said that they think the financial markets are ‘overvalued’ after rebounding from March lows due to global governments stimulus packages to offset the economic impact of the Covid-19 pandemic.

Cash levels at fund managers fell in June to 4.7%, down from 5.7% the month prior, with 93% of investors surveyed admitting they were growing increasingly concerned about the prospect of a prolonged recession.

BofA said in the report that the recent rise in investor optimism remains ‘fragile’ and unlikely to be maintained amid the myriad of macroeconomic headwinds.

How to trade commodities with IG

Looking to trade the gold and other commodities? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Spot Gold’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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