Gold outlook remains bullish despite temporary setback

Covid-19 Contango Gold deflation gold prices volatility goldistara / Pixabay

The outlook for gold prices looks bullish even though the metal’s price has declined today. Investors started to rotate back into risk assets, boosting stock indices. Most analysts agree that the overall outlook for gold is an uptrend as concerns about the coronavirus and a price war in oil continue.

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Gold outlook is "bulletproof"

In his daily commentary, OANDA Senior Market Analyst Edward Moya noted that the gold price has been struggling today as investors rotated back into riskier assets. However, while he warned that there could be downside all the way down to $1,625 an ounce, he sees a strong outlook for the yellow metal.

"Gold’s outlook is still bulletproof if you can handle wild swings," he said. "If the U.S. stock risk appetite rally extends above last night’s high, gold in the very short-term could have downward pressure target the $1,625 an ounce level.  Gold’s bullish outlook is still in place as the dollar will end up becoming a funding currency and a wrath of global monetary easing and fiscal stimulus will ultimately take prices toward the 2011 record high."

As of the time of this writing, the gold price has been holding above the $1,650 an ounce level, so it hasn't tested $1,625 yet.

The perfect time to hold gold

BNP Paribas analyst Harry Tchilinguirian told Kitco News on Monday that this is the "perfect time to hold some gold." He noted that real yields on U.S. Treasuries are negative, which means the opportunity cost of holding gold is nonexistent. He also pointed out that Treasury Inflation-Protected Securities (TIPS) 10-year bonds are hovering around -50 basis points, marking record lows. However, he also believes TIPS yields have room to move even lower.

Many analysts expect the Federal Reserve to follow its emergency interest rate cut with another cut at its March meeting next week, and BNP agrees. With rates as low as they are, Tchilinguirian believes the gold price could rise to between $1,700 and $1,725 an ounce.

However, he also noted that the yellow metal will remain sensitive to stock movements on a day-to-day basis. He doesn't expect a "rush" to $1,800 an ounce. Instead, he expects the metal to "zig-zag higher."

Fear continues to support the gold outlook

Some gold outlooks price the yellow metal even higher—at $2,000 an ounce. According to Business Insider, RWC Partners portfolio manager Clark Fenton said in a research note that the gold price could surpass $2,000 at some point this year, especially since the Fed's emergency rate cut.

Although the gold price has posted some strong upward moves, he doesn't believe investors have missed their opportunity on the precious metal. He believes the gold price has a long way to go, and not just because of its status as a safe-haven asset.

He believes the world has "changed fundamentally," noting that real rates have never been as low as they are now globally. Thus, investors will have to look beyond bonds if they want to preserve their wealth. He also believes the high level of fear currently apparent in the markets could play a role in pushing the gold price to $2,000 an ounce.

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at [email protected]

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