The gold price never ceases to amaze: it again hit a record. Gold has reached a historic high above $2,000 per troy ounce. After the recent downturn, gold has rushed forward again amid the approval process of the next fiscal stimulus package by the US Congress.
It is about another trillion dollars that the US Treasury will obviously have to borrow in the market, and the Fed will have to monetize this debt. That is why BMO Capital Markets analysts note that the US dollar loses its confidence.
Experts from RBC Capital Markets noted that traders are actively investing in gold amid ultra-low yields on US bonds and an abundance of funds in the financial system due to the Fed's efforts. According to some data, the investment in gold exceeded the amount of gold in German reserves. Moreover, gold is attractive due to the political tensions in the world.
The RBCCM noted that the national debt of some countries continues to grow due to active fiscal stimulus. Recovery prospects remain mixed, and the US dollar's appeal is dwindling. Bank experts predict a 40% rally in gold to $3,000 per ounce.
At the same time, analysts believe that records in the precious metals market will soon end.
The excitement for gold is explained by good dynamics. In just one month, the precious metal added about $200, or more than 10%. The first half of the year was the most productive for gold in the last 10 years.
The US dollar index, which measures value against a basket of six currencies, fell below 93 points. The last time such a point was noticed more than two years ago.
However, for the first time in 20 years, the dollar fell into a phase of deep devaluation against other reserve currencies. Since the end of March, the American currency has weakened by 10%. It has all chances to lose the same amount by the end of summer.
The Fed neglects currency in order to get the economy back to growth. The GDP indicator fell by a third. Do not forget about the tensions between China and the United States. These factors are forcing investors to shift from US government securities to other safe-haven assets, including gold.
According to quarterly reports from gold mining companies, precious metal production has plummeted due to the pandemic. Mining corporations were forced to cut supplies by 15%. The world's largest gold producer Newmont Goldcorp has cut production by more than 20%.
In this regard, forecasts for the price of gold for the next year have been increased. Goldman Sachs forecasts a rise to $2,500 and Bank of America – to $3,000.
Nevertheless, the bright era of expensive precious metals will not last long. Analysts believe that in six months the US dollar will begin to recover amid the growth of the global economy and the revival of interest in investments in the real sectors. Therefore, they recommend moving away from investing in gold closer to spring, so as not to get into a prolonged drawdown, which can last 7-10 years.