Time To Buy With Gold To Hit New Record Highs, Say Analysts

Gold prices may be volatile right now but longer term the outlook is bright, and prices are set to reach new record highs, precious-metals analysts believe, so now could be a great time to invest in physical gold, including jewellery.

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Many have been comparing the yellow metal's recent downward trading pattern to its behaviour during the 2008 financial crisis.

“The current gold market sell-off is similar to what happened during the financial crisis, when gold prices dropped ... as increased volatility and margin calls forced levered investors to sell to provide liquidity,” TD Securities strategists told Kitco.

But this sell-off is not only temporary, according the bank, and it can also lead to even higher highs for gold.

“If as expected, we get the coordinated G7 central-bank and G7 government stimulus, the pending historic low real/nominal interest rates, liquidity injections and income support programmes should reduce volatility and drive capital into gold again, lifting prices to new highs near $1,800/oz [£1,495/oz],” the strategists said.

This view is echoed by many other analysts. Blue Line Futures president Bill Baruch told Kitco on Monday that gold is looking at a recovery in the medium term and even new record highs in the next 12 to 18 months.

“There is going to be a bottom here; there is going to be a tremendous buying opportunity ... I feel very confident that gold is going to be setting a new record high in the intermediate or long-term,” Baruch noted. “Once gold stabilises and other asset classes stabilise, you’re going to be able to ride the wave higher.”

RBC Capital Markets views any gold declines as a buying opportunity at the moment as it expects higher prices going forward.

“The gold-positive conditions that led to gold’s rise were not and are not over,” said RBC commodity strategist Christopher Louney. “On average, we expect gold’s elevated price levels to extend through Q2, meaning that gold prices are likely to average at or even above our high scenario in H1 2020 depending on how the crisis unfolds economically.”

Supporting factors for gold going forward are low interest rates, equity volatility, lower yields and rising uncertainty.  

“Gold’s role as a ‘perceived safe haven’ is largely what got it here, and despite these sharp moves lower, we do not think it represents the end of the risk-off narrative for gold,” Mr Louney added.

On Tuesday, gold saw a strong rally forming as prices were up nearly 4% on the day with April Comex gold futures last trading at $1,541.10.

At 4.20pm on Tuesday March 17 in the UK, gold was at £1,271.58/oz.