From Birch Gold Group
This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Calls for even higher gold prices are growing louder, the levels that gold could capture next, and silver prices hit seven-year high as gold moves up.
Forget $1,911, as $2,000 seems to be the next target for gold
Analysts who were hesitant to commit to an overly bullish forecast for gold a week or two ago might have been taken aback as gold has smashed through its prior record, set in 2011.
To Chintan Karnani, chief market analyst at Insignia Consultants, the all-time high is no longer a level that investors should pay particular attention to. Rather, they should focus on $2,000 as the next target that looks very reachable in the near future. Karnani, like Metals Daily CEO Ross Norman, expects the next week or two to have some pullbacks or profit taking, yet not in any manner significant enough to warrant a correction.
Norman, whose forecast that gold will reach a new all-time high this year came in December 2019, is only surprised that the move was so rapid, especially as it happened during what is traditionally the weakest quarter for gold. While the pandemic has and continues to play a major role in the price gains, Norman points to a myriad of other factors that have been propelling gold for over a year, such as low or negative interest rates, massive amounts of sovereign debt and an unprecedented expansion of money supply.
With relations between the U.S. and China worsening by the day and another heated election coming up, George Gero, managing director at RBC Wealth Management, notes that there is plenty of room for gold to continue running higher for a very long time. Taking into account gold’s nearly 50% gain over the past two years, the run will most certainly be an interesting one.
What are some of gold’s next levels?
Over the past few months, $1,600, $1,750 and $1,800 were all upside levels that forecasters pointed to as key points for gold to capture and hold onto. Now that gold has reached record highs, Forbes contributor Clem Chambers has looked into some of the next price targets that the metal could be aiming for.
To Chambers, $2,400 seems like a realistic price level, and one that isn’t too far off. While there is no shortage of drivers pushing gold up, Chambers believes the global monetary stimulus will play a key role in gold being re-valued once again. The pandemic has forced countries to print out billions of dollars, and in the U.S.’ case, trillions. Given gold’s fairly rigid correlation with inflation, the 30% increase in U.S. money supply over the past few weeks should, and appears to be, translating to a 30% gain in gold prices.
From here, Chambers is watchful in regards to how much more money will be printed. In a worst-case scenario for gold, not much stimulus will be issued further, and prices will remain close to where they are right now. To Chambers, this scenario is highly hypothetical and perhaps naively optimistic due to the massive amount of damage that global economies have suffered and the need to patch up the red-flagging budget deficits of individual countries.
Aside from what looks like guaranteed currency depreciation, Chambers points to two other factors that could work in gold’s favor and perhaps materialize very bullish predictions by certain forecasters whom are expecting gold to reach $5,000 over the next few years. The first is the keenness of sovereign nations to accumulate gold during times of massive uncertainty, such as the one we are facing right now. The second is the wave of speculators that have entered the gold market as faith in the U.S. economy and the dollar erodes, which could turn gold into far more than just a hedge in most portfolios.
In reaching $24 for the first time since 2013, silver might have taken just a bit of attention from gold
After being suppressed for a long period of time even amid gold’s gains, silver finally posted a round of catch-up by gaining 18% last week. It has started this week even better, by topping $24 for the first time since 2013.
In making its way to a seven-year high, the metal has undoubtedly shaken off its recent reluctance to keep up with the strength of gold’s gains, despite their fairly tight correlation throughout history. The heightened demand for silver is easy to decipher, as investors rush to safe havens amid uncertainty and there fewer of those with each passing day.
Silver’s trajectory might be one to closely monitor over the coming months. Despite the economic downturn, silver remains a key component in many sought-after products, and half of its demand usually comes from the industrial sector. The recent gains in silver, however, were likely fueled almost exclusively by investors noticing that the metal is sporting an unusually low valuation compared to gold.
The gold-to-silver ratio has only been as high as it currently is on three occasions over the past two decades, and each of them was followed by a prolonged bout of massive price gains for silver. Before the pandemic, many experts were merely waiting to see how long the fourth instance will take to come about. While the two metals have their differences, the unprecedented increase in safe-haven demand compared with historically-low silver prices could make way for some interesting market action over the coming months.