The recent debate around the likely surge in the price of gold has not subsided. Supporters of this version give their arguments, and opponents object to them, believing that the protective assets, which include gold, do not grow without a serious reason. Experts evaluate the implementation of these forecasts 50x50, paying tribute to a thorough analysis of the situation on both sides.
According to the strategists of the precious metals market, gold has won the palm among the instruments of the "safe haven" this year. It has become the best protective asset, ahead of the dollar. Moreover, the current rise in the price of the key precious metal is due precisely to the dollar's weakness.
On Wednesday, July 8, the yellow metal rose sharply by more than 1%, to $ 1,814 per 1 troy ounce. Experts say that this was a new record since September 2011. Gold is actively gaining height, adding 19.3% since the beginning of this year. Experts consider this the best result not only among precious metals, but also all world currencies. At the same time, positive forecasts for the solar metal started after the impressive growth of the latter.
Gold lives up to market expectations, showing a strong upward impulse. On Thursday morning, July 9, gold began to rise, plying near the marks of $ 1810 - $ 1811. Later, it gained height, reaching $ 1812 and did not stop there.
According to analysts, yesterday's rise in the price of gold contributed to a combination of factors, including a reduction in risk appetite and cheaper USD. In this story, experts emphasize that the precious metal turned out to be the beneficiary. Among the main drivers of growth in its price, experts note the hedging of long positions in exchange markets and the high probability of an inflationary surge after stimulus measures taken by central banks.
The current strategy of world regulators aimed at supporting the economies of their countries after the crisis caused by the pandemic of the COVID-19 contributes to the steady growth of gold. According to Frank Holmes, an investor and manager of US Global Investors, the precious metal will test an impressive mark of $ 4000 per 1 ounce in the next three years. The implementation of such a scenario is possible if global central banks, primarily the US Federal Reserve, continue their current monetary policy.
According to the observations of F. Holmes, a retrospective look at the dynamics of the price of gold, that is, a return to the history of growth in its price, clarifies a lot. During the previous phase of growth in the price of precious metals, which lasted from 2008 to 2011, the US Federal Reserve also increased its balance sheet. As a result, it reached the same impressive size as now, amid the fight against the negative effects of coronavirus. The current situation is unprecedented, as the Federal Reserve still adhered to some restrictions when purchasing securities in the past years. Now that the printing press is turned on at full capacity to revive the American economy, nothing will stop gold from growing.
According to the calculations of the head of US Global Investors, the price of precious metal soared from $ 750 to an impressive $ 1,900 per ounce from 2008 to 2011. If we deduce the past to the current situation, then F. Holmes is sure that its price can reach $ 4000 in the case of repeating cycles of gold dynamics. At the same time, the investor does not consider such a price to be fantastic. He believes that $ 4,000 per ounce is a natural result of the growth of precious metals, based on current calculations.
The growing popularity of the yellow metal is proved by the colossal influx of funds into exchange-traded funds backed by gold ("gold" ETFs). According to experts, the reserves of solar metal in them were replenished by 104 tons over the past month. According to Bloomberg, to date, the volume of precious metal reserves in the gold ETF has increased to 3235 tons. The first half of 2020 was also favorable for solar metal: during the reporting period, the volume of gold reserves in the ETF reached an impressive 734 tons, and this is not the limit.
After analyzing the current situation, experts concluded that most of the positive forecasts for gold are true. Analysts are confident that the precious metal will continue to grow. This is facilitated by low interest rates, cheap liquidity, increasing balance sheets of central banks and large-scale fiscal expenses of a number of states.
