Gold price prediction: Is US$4,000 by the end of 2021 within reach?

One analyst raised his gold price forecast to US$2,500 by the end of 2020, while another believes the asset is headed for US$4,000 in the 'next couple of years'.

Why is the Gold price rising?

Gold price is starting to trend higher again, after having begun the week on a lower note.

Gold contracts expiring in December 2020 are priced at US$1,995 each, based on the latest IG data on Tuesday 01 September 2020.

This represents an increase of around 1.7% since the previous day’s low of US$1,962.

Tuesday’s strong start also renews an uptrend that first began last Thursday 27 August, after the US Federal Reserve guided that interest rates will continue to stay down ‘for some time’, as part of a wider economic recovery plan.

This decision has allowed gold price to rally over 4%. Reversely, the US Dollar Index – directly related to Fed rates – has been languishing at a 2.5-year low, while the Volatility Index (VIX) is at its highest level since mid-July.

The safe-haven asset’s price increase also coincided with the US equity markets’ decline on Monday 31 August 2020. The S&P 500 and Dow Jones Industrial Average finished the day 0.22% and 0.78% lower respectively.

IG's market analysis shows that 79% of client accounts with open positions in this market expect the price to rise (net long), with the remaining 21% expecting the price to fall (net short).

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Gold price forecast: US$2,500 by the end of 2020?

In the immediate period, IG market strategist Pan Jingyi says gold prices will be ‘one to watch in the coming sessions with a breakout awaited here’.

‘On one hand, the weaker US dollar is positive for gold. On the other hand, we have firmer yields that threaten to weigh on the precious metal. Broadly, the weaker US dollar and the splatter of uncertainties ranging politics to geopolitics are expected to keep gold prices supported,’ she wrote.

However, any decline to sub-US$1900 levels could induce further selling, Pan added.

Looking further ahead, E.B. Tucker, director of Metalla Royalty, told Kitco News last month that he sees gold’s ongoing bullish momentum taking the commodity to a US$2,500 price target by the end of 2020.

‘Normally I would say (the bull run is overheated) but what I’m seeing in the daily action is that gold is rising in a very measured way and is not meeting much resistance, so when that’s happening you just step out of the way and let it go, that’s what you do,’ Tucker said.

‘At some point you will have a correction, but you’re not going to have the correction yet. So when you see a chart moving like this, you take your position’ he added.

Frank Holmes, CEO of US Global Investors, is even more bullish about prices, predicting that gold’s price could top US$4,000 in the ‘next couple of years…because of economic forces’.

‘If we look back over the past 20 and a half years of this century, gold has been up 80% of the time. But most people are so quick to be bearish on it. Gold is outperforming the S&P 500 by almost three to one,’ said Holmes.

‘So I think we are going to see in this cycle a greater adoption of gold as an important asset class, rebalanced once a quarter or once a year, but it should be in your portfolio,’ he concluded.

How to buy and sell Gold with IG

Are you feeling bullish or bearish on the Gold price? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Gold> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research 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.

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