Analysts Predict Gold Prices Might Go Beyond $2000 This Year




Image Credit – CNBC


Due to geopolitical and economic uncertainties leading to a rush for more secured assets, it is predicted by analysts that this year the gold prices might surge beyond the level of $2000.

On Monday, spot gold had jumped to record levels during Asia hours. It was trading at $1,931.11 per ounce after reaching as high as $1,943.92 per ounce. These levels have overcome the previous record price that was set way back in September 2011. In the afternoon, gold was trading at around $1,932.81 per ounce.

The mining and energy commodities analyst of the Commonwealth Bank of Australia, VivekDhar told CNBC on Monday, ‘We think the current momentum in the next few months will cross the $2,000 an ounce mark. The key question is how much does the rally increase after that.’

He also said that to make sure that the prices are well above that level – around $2,500 per ounce, the United States would need to make the interest rates below zero.

An inverse relationship exists between gold prices and real yields. Real yield is defined as an investment return that has been re-structured for inflation.

Gold prices go up, as soon as real yields go down, and vice versa. In such cases, the opportunity cost of holding, which is a non-yielding asset, is way low as the investors do not forego the interest that can be earned in yielding assets.

This year, the benchmark rate has been maintained close to zero by the Fed. There has been discussion over whether or not is should go to negative just like its counterparts in Japan and Europe.

The managing partner at precious metals dealer J. Rotbart& Co., Joshua Robert also expressed his concerns over the increase of gold prices beyond $2,000 by the end of the year.

Due to the COVID-19 pandemic and the weakening of the global economy, investors are driven by a ‘fear factor’ and are rushing to purchase the precious metal, Joshua told CNBC on Friday, ‘Investors are nervous, they are afraid, there’s a fear factor and they are rushing to gold.’

Coronavirus cases are still on the rise across the entire globe, with many countries experiencing waves of the pandemic appearing even after controlling the outbreak in the first place. At this moment, there are more than 16 million reported cases around the world and over 648,000 have already died, as suggested by the data compiled by Johns Hopkins University.

Rotbart said, ‘With current conditions of loosening monetary and fiscal policy, global recession, unemployment and governments cannot control this. I think we will see (gold prices) heading over the $2,000 mark.’

Prices of gold have increased by almost 30% this year.

Prices had jumped to a nine-year high last week, due to the European Union leader approaching an agreement to roll out a stimulus package of $2 trillion. As per the analysts, this package will push the real rates even lower, considered as a boom for gold.


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