Gold attitude to hike all-time high in 2020
“The various items we’re looking at all point to the same direction and pretty well the same number,” said Ross Norman in a presentation. He also said, Gold Price Could Approach All-time High in 2020.
Despite some turmoil, gold has performed strongly overall in 2020 as of April 23, it was up around 11 percent year-to-date, trading near US$1,720 per ounce. But where is gold going for the rest of the year? According to independent analyst Ross Norman, the metal could get close to the US$1,900 level in 2020, and it may even pass that point.
Norman shared his views in a presentation at the World Gold Forum, an online event put on by the Denver Gold Group. Read on to learn why he thinks all signs point to a better price for gold. Negative real rates the real driver for gold. As mentioned, Norman has a positive outlook on the gold price, and to start he explained why he thinks the precious metal is positioned to succeed. In his opinion, a shift into gold started to happen in 2018 and 2019, eventually allowing it to pass the key US$1,360 mark in June of last year.
“What was it in 2018 and 2019 that spurred this massive move into gold? We believe that the long-term driver of money into gold has been negative real rates, in particular in relation to long-term US Treasuries,” he suggested to listeners. He explained that gold reacts poorly to strong US Treasury yields, but responds well to weak yields. For example, a yield of -3 percent would result in a “galloping” gold price rise of between 30 and 40 percent.
In 2018, futures traders were net short gold, he said. But as US Treasury yields started to fall, they reversed their positions. “That was the swing factor that was the driving force that took us to that really important S$1,360 level,” he said. Norman added that the move in gold was also supported by factors like institutional buying and exchange-traded fund interest.
“In the current environment, where we’ve got negative yields of about -1.5 percent, you will expect gold to go up between … 10 and 20 percent,” he said. “Indeed, we saw last year gold up 18 percent. This year (gold is up) year-to-date 8 percent. We believe there is scope for more.”
Specifically, Norman suggested that gold could see an increase of as much as 24 percent in 2020, leading to a rise to US$1,885 by year end. All signs point to a higher gold price. While Norman was clear about the importance of negative real rates to the gold price, he noted that it of course has other influencers, and ran through three other factors that support higher levels.
“Interestingly, the various items we’re looking at all point to the same direction and pretty well the same number,” he said. Here’s a brief rundown of his thoughts.
