MINING COMPANIES AND ANALYSTS FORECAST A NEW RALLY IN THE PRICE OF GOLD, SILVER & PLATINUM FOR THIS YEAR
By Jose Angel Pedraza
The “exuberance” in the financial markets and the interest of investors to accumulate assets that lack real value is the ideal breeding ground for the price of gold to experience a new rally that returns it to its maximum levels. These are the opinions of Mark Bristow, CEO of the world’s second-largest gold miner, Canadian Barrick Gold, in a recent forum organized by the Prospectors and Developers Association of Canada (PDAC).
According to Bristow, during the Covid-19 pandemic, the additional liquidity generated by governments and central banks has driven the market to a halt: “it’s similar to what happened after 2008, when the market wanted a return to normal, but the extent of the damage was still unknown. The liquidity that was generated between 2009 and 2011 was left to the banks. This time it has reached the market”.
The CEO of Barrick has made reference to an asset such as cryptocurrencies, whose price is rising in recent months: “Investors are desperate. They are not sure what is going to happen. They are buying assets that have no real value of their own on the market. We already saw this exuberance in 2009-2010 and then the collapse took place”. In Bristow’s opinion, all this benefits gold and are factors that will contribute to its price rising again: “We have already witnessed a first rally in the price of gold: now another is being prepared.“
The vice president of the market research company CPM Group, Rohit Savant, also spoke at the same forum, who attributed the fall in the price of gold during the first months of 2021 to the increase in bond yields.
In his view, investors in gold should not be nervous, as although nominal bond yields are growing, real yields (discounting inflation) are going to remain negative for quite some time.
For this reason, CPM Group is optimistic about the evolution of the price of gold, which continues to be supported by long-term factors, such as the increase in debt levels and favorable monetary policy.
Although nominal bond yields have risen from their low last August (US 10-year Treasury yields hit their annual high of 1.5%), they remain extremely low compared to their historical levels. “Also, real returns are still in negative territory and are expected to stay in it,” he said.
In his presentation, Savant noted that CPM Group expects the price of gold to rise again to $1,995 an ounce this year, a 5% increase over last year’s closing price.
In addition to negative real bond yields, Savant said that gold remains attractive as a safe haven in an environment of overvalued capital markets: “Stocks are quite overvalued and this could lead to more volatility. That would be very good for Gold .“
The vice president of the consultancy indicated that investment demand will play a critical role in the gold market during 2021, although it may not be decisive for the price of the metal.
This article is published with the special permission of the CPM Group. For more views and news you can visit https://www.cpmgroup.com/
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