Gold prices could rise beyond the $ 2,000 level this year, as economic and geopolitical uncertainties lead to a race for safer assets, analysts predicted.
On Monday morning during Asian hours, spot gold jumped to record levels, trading at $ 1,931.11 per ounce after previously rising to $ 1,943.92 per ounce. Those levels overshadowed the previous record price set in September 2011. Gold was trading around $ 1,932.81 per ounce in the afternoon.
“We believe the current momentum in the coming months will cross the $ 2,000 per ounce mark. The key question is how much the recovery will increase after that,” Vivek Dhar, a mining and energy commodities analyst at the Commonwealth, told CNBC on Monday. Bank of Australia. .
He added that to see prices well above that level, such as $ 2,500 an ounce, the United States would have to move interest rates to below zero.
There is an inverse relationship between gold prices and real returns. Real return is a return on investment that has been adjusted for inflation.
When real returns go down, gold prices will go up, and vice versa. In such a scenario, the opportunity cost of owning gold, an unprofitable asset, is lower since investors are not giving up interest that would otherwise be earned on profitable assets.
The Fed has kept the benchmark rate close to zero this year, and talks have focused on whether it should be negative like its counterparts in Europe and Japan.
Joshua Rotbart, managing partner at precious metals distributor J. Rotbart & Co., also predicted that gold prices will skyrocket beyond $ 2,000 by the end of the year.
That rush to buy the precious metal is fueled by a “fear factor” among investors due to the coronavirus pandemic and the weakening global economy, he told CNBC on Friday. “Investors are nervous, they are scared, there is a fear factor and they are rushing towards gold.”
Coronavirus cases worldwide have shown no signs of declining, with several countries experiencing subsequent waves after appearing to control the outbreak. There are currently more than 16 million reported cases worldwide and more than 648,000 people have died worldwide, according to data compiled by Johns Hopkins University.
“With the current conditions of loosening monetary and fiscal policy, the global recession, unemployment and governments cannot control this. I think we will see (gold prices) surpass the $ 2,000 mark,” Rotbart said.
Precious metal prices have soared nearly 30% this year.
Last week, it jumped to a maximum of nine years after European Union leaders reached an agreement to implement an unprecedented $ 2 trillion stimulus package. Analysts said the package is likely to push real rates even lower, seen as a boom for gold.
– CNBC’s Eustance Huang contributed to this report.
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