In a recent interview, Jeff Curie, global head of Commodities Research in Global Investment Research (GIR) at Goldman Sachs outlined his reasons for being bullish on gold.
Curie’s interview was with Alix Steel, a co-anchor of Bloomberg Television’s flagship morning show “Bloomberg Daybreak: Americas”, and it took place last Tuesday (May 12), when gold was trading just above the $1,700 level.
When Steel asked Curie if he had “a favorite commodity trade”, this was his reply:
“At this point right now, we still really like gold.
“There are a lot of reasons to own gold. Foremost is that you are still seeing the debasement effects of all the stimulus going on…”
According to a report in MarketWatch that got published on March 24, Curie and his team wrote in a note to the investment bank’s clients:
“We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now.”
Goldman Sachs is not the only investment bank that has been bullish on gold this year.
On April 20, Canadian investment bank and financial services provider TD Securities said that it expected the price of gold to reach $1,900 an ounce within the next three months.
Per a report published on Monday (April 20) by Kitco News, the latest trading call by TD Securities set a $1,900 per ounce price target on gold, and explained why its analysts were bullish on gold:
“We buy gold at $1,710/oz, targeting $1,900/oz in anticipation of continued growth in investment demand amid massive and prolonged unconventional central bank stimulus.”
Kitco’s report said that TD Securities’ “Long Active Gold Futures” call has “an entry of $1,710 an ounce, a target level of $1,900 an ounce, stop-loss of $1,625 an ounce, and an expected horizon of three months.”
TD Securities’ Head of Global Strategy, Bart Melek, and one of its commodity strategists, Daniel Ghali, had this to say:
“The Fed’s latest QE program is now the largest on record.
“Of course, there is a well-known relationship between QE and lower real rates, such that it ultimately suppresses real rates by lifting inflation expectations at a faster pace than nominal rates …
“The Fed and other central banks are likely to keep their uber-easy policies in place for far longer than anticipated, following a decade of below-target inflation and a newfound interest in asymmetric inflation targeting.”
They went on to add:
“Despite the bullish outlook, dry-powder analysis suggests only a modest bullish tilt, while CTA positioning remains subdued given their vol-targeting nature.
“Consensus analyst forecasts remain below spot prices, despite positive sentiment, strengthening the argument that the market is underestimating the potential impact on gold.
“We expect investment demand to rise as liquidity returns.”
Before gold can go much higher, Melek says that we need to see “a bit of economic stability” in the U.S., after which inflation could drive the gold price higher.
Then, the next day (April 21), Bloomberg reported that Bank of America had increased its 18-month price target for gold from $2,000 to $3,000 an ounce in a report titled “The Fed can’t print gold.”
BofA’s research report was written by Metal Strategist Michael Widmer, who is head of research in metal markets, and Francisco Blanch, who is the global head of commodities research.
The two analysts/strategists expect the demand for gold to go up as governments around the world use monetary and fiscal tools to combat the economic damage caused by the COVID-19 pandemic:
“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure… Investors will aim for gold.”
As Coindesk reported in late March, interest in gold-backed crypto tokens, such as PAX Gold (PAXG) and Tether Gold (XAUT), continues to go up as physical gold in the form of bullion coins or small gold bars becomes increasingly harder to find due to the restrictions in place as a result of the COVID-19 pandemic.
Roy Sebag, founder of precious metals custodian Goldmoney, told Coindesk:
“The Fed completely changed the rules – the real rate of interest swung even more and so we are seeing all that money flow into gold immediately.”
According to data by TradingView, currently (around 15:27 UTC on May 18) spot gold is trading at $1729.41, down $14.53 (i.e. -0.83%):
Gold is up 13.82% against USD in the year-to-date (YTD) period.
Last Saturday (May 16), Robert Kiyosaki, best known as the author of the “Rich Dad Poor Dad’ series of personal finance books, made some quite bold price predictions for silver, gold, and Bitcoin.
Kiyosaki, who has been criticizing for the past several weeks the Federal Reserve’s response to the economic damage caused by the COVID-19 pandemic, sent out a tweet that laid out where he thinks the prices of silver, gold, and Bitcoin will go within the next few years. With regards to gold, Kiyosaki’s price target for gold is $3000 per ounce within one year.