Although gold has traditionally remained a strong commodity to invest as many believe the US economy is beginning to enter a bearish downturn, its appeal has declined a little over the past couple of years. Commodity investors noted gold’s decline from its position as the most valued precious metal as palladium prices continued to increase. However, at least one major analyst on Wall Street expects 2019 to be the year where gold shines.
Goldman Sach’s head of commodities research Jeff Currier spoke on Bloomberg today, where he said that the precious metal will see prices rise due to strong central bank buying and other factors. He also doesn’t expect an earlier recovery in long-cycle investment alongside other industrial metals as China’s economy shows signs of slowing down, but gold remains one area he’s extremely bullish on.
“The last time gold topped $1,400 an ounce was briefly in early September 2013,” Currier said. Besides increased physical demand from the top two gold markets, he added that “recessionary fears are raising physical demand for gold” alongside central bank buying power would push the price of gold to $1,425 relatively soon.
The influence from the central bank alone he argued was strong enough to push the price of gold upwards to heights not seen in several years. Currently, Goldman Sach’s target price for the precious metal is at $1,450 per ounce, a double-digit gain from golds current price of $1,314 per ounce. Additionally, gold-backed exchange traded funds are becoming more popular, with holdings rising to the highest levels seen since May of last year. Gold futures have also increased 11 percent from their low in August.
Although the current price is at a seven-month high, many analysts outside of Wall Street concur with Currier’s assessments. “we expect the safe-haven bid, and to a lesser extent, gold’s inflation hedge properties, to remain key drivers of the metal’s price in 2019, complemented by a resurgence of physical demand,” said Cantor Fitzgerald analysts in a report. Both gold and silver are “looking good in 2019.”
Much of these concerns also stem from US-Chin trade tensions. On Monday, The United States charged Chinese telecom equipment producer Huawei (SHE: 002502) alongside many of its key executives with bank and wire fraud. With investors concerned that these charges will further complicate the already tense trade talks between the two countries, many have sought refuge in the yellow metal.
At the same time, there are a plethora of other geopolitical concerns abound to make investors worried. The recent economic sanctions slapped against Venezuela – a major oil produce – by the U.S. has caused worries to grow. Additionally the UK parliament voted on Tuesday on the “Plan B” Brexit initiative from Prime Minister Theresa May, with her last plan for getting her country out of the EU getting voted down by Parliament.
Other investors suspect that gold prices could shoot even higher and that Goldman Sach’s estimates are too mild. Frank Holmes, CEO of US Global Investors (NASDAQ: GROW) recently said that gold could shoot up to $1,500 per ounce this year. Only time will tell just how high the price will rise.