Analysts Predict That Gold Has Enough Force To Move Above $2,000 An Ounce

Gold has seen colossal momentum so far this year, enabling the metal to pick up generally 20% since January

Gold has enjoyed tremendous momentum so far this year, allowing the metal to gain roughly 20% since January. The strength of its drivers became especially prominent this summer, when gold climbed above six-year highs during what is normally its weakest quarter.

Although gold continues to make moves above $1,530 an ounce and many analysts have upgraded their near-term forecast to $1,600 an ounce, a MarketWatch article reports others are seeing $2,000 as a more realistic level in gold's immediate future.

In a recent publication, Brien Lundin, editor of Gold Newsletter, drew a line between what he sees as short- and long-term factors powering gold's remarkable run. The former category includes the now-infamous U.S.-China trade war, whose ongoing escalation has sparked fears that the dispute will bear a heavy toll on the global economy, sending investors flocking towards safe-havens.

According to MarketWatch, other short-term boosters include renewed threats of a recession occurring in the U.S., which were present throughout the Federal Reserve's hiking schedule but came to special prominence due to the recent inversion of the yield curve in both the 2-year and 10-year Treasuries. The likelihood of successive rate cuts by the Fed and persistent weakness in global economic data reports have also played their role as gold's near-term tailwinds. Deric Scott, vice president and senior analyst at precious-metals retailer Metals.com, has also pointed to conflict in Hong Kong and Iran as two events that have been pushing investors towards safety.

Yet both Lundin and Stan Bharti, chief executive officer of private merchant bank Forbes & Manhattan, believe that there is a much stronger force driving gold's prices, which will ultimately result in gold surpassing its all-time highs. In the MarketWatch article, Bharti notes the last 8-10 years have seen investors jump onto the bullish bandwagon in the stock market in a low-interest environment. Yet Bharti thinks that this era is drawing to a close, and that inflationary concerns will once again drive investors back to hard assets.

Lundin also sees the likeliness of heightened inflation as a key element to higher gold prices, as gold has historically acted as the premier hedge against depreciating currencies. The analyst thinks that any indication of quantitative easing (QE) in the U.S. would send gold soaring. Recently, both the Fed and the European Central Bank have hinted towards looser monetary policies in the near future, including a possible return to QE programs.

Over the short-term, Bharti sees gold jumping from its current levels to reach $1,600 in the next quarter. By the end of next year, the CEO expects gold prices to climb above $2,000 an ounce. Lundin echoed Bharti's sentiment, stating that gold's climb to $1,800 or $2,000 is a near-certainty over a longer stretch of time.

Gold Market Could See Major Breakout

Brexit troubles could help clear the path for gold to reach $1,400 an ounce by year's end.

Gold prices have remained virtually unchanged over the past week, even as a surprisingly optimistic jobs report gave the stock market some much-needed breathing room. According to a recent article by Kitco, however, the lack of any real price movement in the gold market may represent a calm before the storm, one that could end in a major breakout.

Gold’s price invariably thrives during times of geopolitical strife, writes Kitco, and there appears to be no shortage of the latter coming from different corners of the globe. Britain's troubles surrounding their exit from the European Union have made the headlines of most outlets in recent days as Theresa May's government appears unable to broker a deal with Brussels.

With the April 12 deadline for a satisfactory agreement fast-approaching, May requested that negotiations be postponed until June 30. According to the article, should the EU dismiss the request, Britain will be forced into a hard exit from the alliance, which could have numerous dire consequences. These include a devaluation of the sterling and even a potential revision of the Irish border.

Although a Brexit extension could help avoid this scenario, it will further erode the trust of British citizens as their parliament struggles to satisfy Brussels, suggests Kitco. The situation plays into existing tensions in the eurozone, which include Italy's opposition to Brussels' budget terms, an ongoing migrant crisis and an increasingly dovish European Central Bank.

The ECB recently downgraded its growth forecast and placed into question the prospect of hiking interest rates this year. An official announcement is scheduled for next week, and confirmation that rates will remain stationary could provide gold with additional leverage.

On the domestic front, the Federal Reserve's dovish turnaround in March already helped boost gold prices. The minutes from the meeting will be released on Wednesday, and market watchers will be looking to scour the transcript for details on just how far the Fed intends to pull back.

Although a potential U.S.-China trade deal could subdue gold prices in the short term, President Trump said that negotiations will likely last for weeks, leaving investors with little certainty. The culmination of the Mueller probe did little to calm domestic political tensions, and Trump's collision with Russia over Vladimir Putin's support of Venezuelan president Nicolas Maduro is yet another source of concern.

Traders are now waiting for next week's CPI and PPI reports, and Kitco says signs of rising inflation would likely translate to immediate short-term gains in gold prices. Over the longer term, gold should receive plenty of support as equities resume their downtrend, said Ross Strachan, senior commodities economist at Capital Economics.

Combined with weaker growth projections in both the U.S. and Europe, Strachan believes the path has been cleared for gold to reach $1,400 an ounce by year's end.

ING Analysts See Gold Hitting $1,400 This Time Next Year

ING's team believes gold stands to gain more from uncertainties than it has in recent months.

According to a recent report by ING, gold will eventually break past its current levels and make a run above $1,400 an ounce. Kitco reported that the metal has enjoyed numerous positive geopolitical and macroeconomic developments, which included the U.S.-North Korea conflict, trade tensions between the U.S. and various countries and several flare-ups within the eurozone.

ING's team believes that the metal stands to gain much more from these uncertainties than it has in recent months. Besides current tailwinds, ING's commodities strategist Oliver Nugent said that the metal will be assisted by several new catalysts.

One of the primary drivers of the breakout, said Nugent, could be a willingness by the Federal Reserve to allow inflation to run past the targeted rate of 2%. The article writes that inflation only recently moved towards the long-coveted 2% after trending downwards for a prolonged period of time. Some analysts warned that the sudden reversal could mean an explosion of the inflation rate past what the Fed could manage.

These concerns could prove valid as inflation continues to run upwards, having most recently clocked in at 2.5%. Should the Fed allow inflation to run its course, whether by choice or necessity, gold would find itself among the primary beneficiaries reports Kitco.

A shift in inflation expectations would also help move gold towards ING's forecasted price. While expectations have been subdued in recent months, Kitco writes the steady uptrend in inflation could eventually affect sentiment and tell market participants that it's time to brace for significantly higher prices.

Although there is little question that lower bond yields play in gold's favor, Nugent thinks that the drop in Treasuries was another booster overlooked by the gold market. Nonetheless, the ongoing loss in yields should prove to be a major factor in gold's rise predicts Kitco.

"Since its peak two weeks ago (May 16th) US treasury yields have fallen hard, boosting gold's appeal as a non-yielding asset and supporting a brief break above $1300/oz. The ten year has dropped from a high above 3.1% to a low of 2.78%, before recovering slightly but still remains below the psychological 3%," said Nugent.

The analyst believes that geopolitical tensions could come to a head as the G7 summit draws to a close, with many of the attending countries being at odds with one another over trade issues. Strong physical fundamentals will also support gold, said Nugent, with recent Swiss export statistics featuring a prominent upgrade. The country recorded a 2% increase in bullion exports for the first four months of 2018, an increase driven largely by Chinese demand.

Ultimately, ING believes gold's long-term trajectory is set in stone, as the bank expects the metal to average $1,400 an ounce by the second quarter of 2019.