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Gold could hit $2,000 in a world full of negative yields

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In a world full of negative yielding debt, hard assets like gold could become even more attractive, and some strategists say a case could be made for a $2,000 per ounce price tag on the precious metal.

Gold futures were at $1,513.80 an ounce Tuesday, down about 0.2%. In late May, gold snapped out of its slumber, broke above $1,300 and has not looked back. In September, 2011, gold futures reached all-time high of $1,923.70 per ounce.

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“We have a long position trade on. We are targeting $1,585,” said Daniel Ghali, commodities strategist at TD Ameritrade. “We do think gold is on its way higher for the time being...Over the coming years as the likelihood of the unconventional policy becomes more of a reality, I could see a case for gold at $2,000.”

Gold has also been firming as the world watches protests in Hong Kong and also the uncertainty around U.S., China trade relations. On Tuesday, gold erased its gains and risk assets rallied after the U.S. announced it would hold off on tariffs on consumer products until mid-December.

TD Ameritrade strategists believe the many years of unconventional and easy monetary policy from the world’s central banks has resulted in a shortage of “safe assets” and that’s “evident by the fast growing pile of negative yielding debt, which is ultimately leading to a growing appetite for precious metals.”

“Negative yields are symptomatic for the search for safe assets. The reason they’re trading at negative yields is because the demand for safe assets is bigger than the supply for them,′ said Ghali. “Gold stands to benefit quite a bit from that.. the trade we’ve been recommending we have it as a three moth time horizon. I would argue we are likely on the cusp of a multi-year bull market for gold.”

 

Bank of America Merrill Lynch’s metals strategist Michael Widmer, in a note, also says negative yields are making gold shine. He said the successive rounds of monetary easing driving bond yields lower and creating $14 trillion in negative yielding debt have also been recently supported gold prices. “With more easing to come, the dynamic will likely sustain a bid for the yellow metal,” he wrote.

But Widmer said all of the rounds of central bank moves, including quantitative easing, have clearly delivered “less bang for the buck” when it comes to stimulus. He said this could result in “quantitative failure,” or an environment where markets focus on high debt levels or the lack of economic growth, and that could lead to volatility.

“At the same time, and perhaps perversely, such a sell-off may prompt central banks to ease more aggressively, making gold an even more attractive asset to hold. We have a relatively conservative 2Q20 forecast of $1,500/oz, but in this scenario, we see scope for gold to rise towards $2,000/oz,” he wrote in a note.

Widmer said central banks are also driving up gold, as they have now become net buyers of the metal. Widmer notes that the World Gold Council expects gold reserves to increase over the next year at central banks.

“The motivation behind the respective reserve strategies varies, with the historical positioning, the long-term store of value, gold’s role as an effective portfolio diversifier and lack of default risk featuring the highest among EM and DM institutions. De-dollarization features as well as a motivation,” Widmer wrote.

Gold futures [for December] are up more than 5.2% in August so far, and 18% for the year so far.

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tacobell fan
Just now, JollyBoy said:

@Amrita  overnight billionaire aipotundi anamata

Billionaires kotha ga Billionaries avvadam enti worst ga. Networth inkocham ekkuva appreciate avvudhi. Dabbulu.. dabbu ni sampadinchadam ante idhe

  • Confused 1

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Amrita
4 minutes ago, JollyBoy said:

@Amrita  overnight billionaire aipotundi anamata

Time to buy gold antava ? Koneddam. Dead  investment safe investment avutondi mataS@nC#aZi

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Spartan
Just now, boeing747 said:

gold konukkomantava aythe.

do u dare to sell it when it hits 2000.? or 1900? then yes u can make a gamble..

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tacobell fan
Just now, boeing747 said:

gold konukkomantava aythe.

dachipettadaniki mee intlo inka place unda?

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Power Star
1 minute ago, JANASENA said:

lol nenu 1200 ki konna 2 biskets

Lol 2k ki ammukko mari atle pettukunu cream bisket avvaku

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Power Star
7 minutes ago, Amrita said:

Time to buy gold antava ? Koneddam. Dead  investment safe investment avutondi mataS@nC#aZi

Mars ki elle mundu gold antha earth meede petti address pm karo

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Power Star
9 minutes ago, boeing747 said:

gold konukkomantava aythe.

Ne istam ammukoo or exchange  tulam bangaram for you know

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Amrita
3 minutes ago, Power Star said:

Mars ki elle mundu gold antha earth meede petti address pm karo

Sure ^^

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tacobell fan
1 minute ago, Power Star said:

Ne istam ammukoo or exchange  tulam bangaram for you know

Age kuda consider cheyyandi brother, they can do only so much exchange

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boeing747
19 minutes ago, tacobell fan said:

Age kuda consider cheyyandi brother, they can do only so much exchange

nuvu kontunnava or ammutunnava inthaki??? already RRealestate motham nee chetilone undi..ipudu gold kuda na?

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Quickgun_murugan
41 minutes ago, Spartan said:

do u dare to sell it when it hits 2000.? or 1900? then yes u can make a gamble..

JDST JNUG stocks meeda oka kannesi unchu @Spartan

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