Gold Forecast: Where Is Gold Heading & Is It Too Late To Buy?

What’s gold been gold doing?

Gold is going gangbusters! There’s been a huge flight to the perceived safe haven over the past week.

Gold has risen 30% this year and almost 400% over the past decade. Gold purchases at more than 18 million ounces over the past month, an increase from 8.4 million for an entire year to July! [1]

Gold Chart - August 2011 Comex Contract

Gold Chart – August 2011 Comex Contract

Why is gold going gangbusters?

The ECB buying of Italian and Spanish bonds was not enough to put fears at ease on the euro crises. The ECBs buying of government debt also acts as a move towards a more expansionary policy shift by the ECB and increases inflationary concerns in the euro.

Similarly in the US investors are becoming increasingly concerned over the impact of the Federal Reserve’s monetary stimulus actions with potential for further action on the back of market crashes this week.

Gold represents a safe haven because of the incapacity of central banks to print more of the precious metial and depreciate its value as they can do with their currencies. There have also been talks of returning to gold as the world’s reserve currency in light of euro and USD concerns.

Where’s gold going? Gold forecasts

Most banks and forecasters are pretty bullish on gold.

Gold Bulls

JP Morgan: “Spot prices could hit 2,500 by year end” [2]

Jeffery Sica, Sica Wealth Management sees 20% to 25% upside in gold. [3]

William Rhind, managing director of ETF securities notes gold was actually trading at an inflation adjusted price of $2,391 back in 1980! When in nominal terms gold traded for $873.

Goldman Sachs forecasts in 3 months spot gold to be at $1,645, 6 months $1,730 and 12 months $1,860. [4]

Professor Charles Nenner, Head of Charles Nenner Research Center: “our long term price target is two-and-a-half thousand”. Nenner believes the 50% increase from current levels can be justified in the long term and don’t have to happen immediately. [5]

Gold Bears

Jeffery Christian, CPM Group Founder & Managing Director

“We think this may well be the top of the market. …Gold could get to 2,500 by the end of the year, but what would the world look like if gold got to 2,500?” [2]

Christian notes that the price premiums aren’t actually rising as fast as the spot price indicating that that investors aren’t necessarily wanting to hold physical gold. This is an indication of the huge volatility in spot gold due to ‘hot money’ flying in from highly leveraged derivatives contracts.

Pat Dorsey, Morningstar’s former director of equity research, shares Christian’s sentiments “I’ve never been a fan of gold. I am in the camp of that thinks it generates no income and has no utility (like copper), so the valuation is based on the opinions of other people”. [3]

References

  1. Commodity Futures Trading Commission, 2011
  2. Two Commodities, Two Paths, Gold & Oil, CNBC, 09/08/2020
  3. How to Trade It – Is it too late for gold fever?, Reuters, 09/08/2020
  4. Gold Hits New Record High Above $1,700, Reuters, 09/08/2020
  5. Gold Is Heading To $2,500: Nenner, Yahoo! Finance, 09/08/2020