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 Price to Push Higher Between 2nd and 3rd Quarter

Orchid Research believes recession fears will help gold's price trend continue.

In their latest analysis, precious metals firm Orchid Research went over some of the reasons that should push gold even higher between the second and third quarters. According to an article on Kitco, despite summer traditionally being gold's weakest period, the metal has seen tremendous price action over the past few weeks and continues to hold steady above the $1,400 level.

Most agree that the major inflows in gold stem from increasing fears over the global economy's state, as well as the Federal Reserve's policies. Orchid's analysts think we're in for a continuation of this trend over the next few months, as fears over a potential crisis persist.

According to Kitco, the report points out that gold has managed to hold strongly and move around six-year highs even against a robust dollar, illustrating the amount of appetite for safe-haven assets among investors. The analysts said that recession fears could very well drive gold prices even higher moving forward, especially in the face of the Fed's recent policy decision.

Nearly every tightening cycle in the U.S. has ended in a recession, and the Federal Reserve has been on a rate-hiking tear since 2015. However, Kitco reports that the force of their recent U-turn suggests that a likely upcoming recession could be more impactful than previous ones. Far from merely ending their hiking schedule, Fed officials immediately suggested that a lengthy period of rate cutting could be on the way.

This, according to Kitco, reinforced the view that U.S. growth is slowing down and that the era of optimistic investment is drawing to a close. President Trump's push for a more dovish Fed board, which include ample rate cuts and a potentially weaker greenback, only served to strengthen this notion.

The Fed's Treasury spreads model alone has steadily upped the chances of a recession occurring in the U.S., moving them from 29% in May to 33% in June. Many analysts are far more pessimistic when taking other factors into account and believe that a U.S. recession this year is a near-certainty.

Besides a fear-inducing growth slowdown, Orchid said that gold will keep benefiting from central banks' ceaseless increases in bullion purchases. Last year, the official sector blew away all forecasts by buying over 650 tons of physical gold combined. A major point of this development has been the re-entry of several countries whose central bankers have shown little interest in bullion over the previous decade. Orchid noted that the past few months have seen steady buying from nearly every emerging-market country, supporting the notion that central bank gold demand is ramping up heavily. China has recently served as the premier example of this, as the PBOC made a loud return to the gold market with 74 tons of gold bought in the first five months of 2019. In June, China's central bank showed no signs of slowing down by adding another 10.3 tons of gold to its reserves.

Orchid also noted that, at current prices, silver offers tremendous value to potential investors. Relative to gold, the metal currently sits at its cheapest point since 1992, providing a very interesting alternative proposition during a time of geopolitical and economic uncertainty.

Goldman Sachs Analyst Shares Why Bank is Raising its Gold Forecast for 2019

Goldman Sachs sees gold soaring to $1,425 over next 12 months.

In a recent note to clients, Goldman Sachs' analysts announced that the bank is raising its forecast for gold going into 2019, reports CNBC. Goldman's previous forecast was bullish in its own right, with the bank calling for $1,250, $1,300 and $1,350 an ounce over the three, six and 12-month periods, respectively.

But now, the analysts expect gold to inch even higher this year. According to a CNBC article, Jeffrey Currie, Goldman's head of commodities research, said in the note that gold will hit $1,325 in the next three months before moving on to $1,375 by the end of the second quarter. The bank sees gold soaring to $1,425 over the next 12 months.

In the note, Currie explained that the change in forecast centers around a quick reversal of sentiment following a re-emergence of risk, states the article. Whereas the previous year saw many investors chase profits backed by the confidence from a strong dollar, the landscape in 2019 could be markedly different.

Various reports indicate that U.S. growth could be heading towards a slump after a prolonged era of Fed-fueled optimism. The U.S. Purchasing Managers Index (PMI) slipped to a 15-month low in December, with manufacturers' confidence in business likewise dropping to the lowest level in almost two years. According to the article, these economic reports build on existing concerns that the Fed has thus far largely ignored, such as the prospect of peaked-out employment.

Nonetheless, the central bank appears ready to dial down on its hawkish rhetoric, with Fed Chair Jerome Powell recently assuring market participants that officials will be ready to adjust the hiking strategy based on market response.

Currie noted that the traditional correlation between rate hikes and gold could be absent this year. According to the article, despite some feeling that higher rates reduce the appeal of owning bullion, Currie firmly believes that risk aversion and fears of a recession will trump the desire for bigger profits.

Recessionary concerns appeared to be validated last month, when U.S. stocks suffered their worst December since the Great Depression. The performance was especially striking as the final month of the year tends to be a strong one for equities. Gold returned more than 4% in that month, and in doing so outperformed the previously record-setting stock market.

Currie stressed that the shift in sentiment will be a key driver of gold prices this year, reports the article. Besides individual investors, the analyst said that central banks will adjust their strategies in accordance and continue upping their monthly bullion purchases. Governments already showed a heavier-than-usual predisposition towards gold in 2018, with data suggesting that total central bank purchases for the year exceeded 450 tons.