Gold: expect $2,400 by next summer

Gold “is back from the wilderness”, says Jack Farchy in the FT. After a year of treading water it has jumped by more than 12% in two months. It is back to around $1,800 an ounce and has reached new record peaks in euros and Swiss francs. The bull market that began in late 2001 should continue.

Not only has the US Federal Reserve launched a further – and this time unlimited – quantitative easing (QE), or money printing, programme, but the European Central bank is prepared to buy unlimited quantities of peripheral bonds. The Bank of Japan has also cranked up the presses again.

The market’s perception is that “expansionary monetary policies, with all their attendant inflation and currency debasement risks, are back on the agenda for an unlimited time and in seemingly unlimited size”, says Morgan Stanley. This is fuelling demand for gold, a traditional currency and store of value that can’t be debased through printing.

The emerging world, notably central banks keen to diversify foreign-exchange holdings, is “a growing source of demand”, says Deutsche Bank. China will overtake India as the main source of jewellery demand this year. Meanwhile, production problems caused by strikes in South Africa suggest that supply is not going to expand fast to meet growing demand.

The technical picture is encouraging too, as US asset manager BlackRock points out. The 50-day moving average recently rose above the 200-day moving average. This so-called “golden cross” formation is a strongly bullish signal and last happened after the Federal Reserve’s first QE programme was launched. If gold’s performance over the next few months mirrors its action back then, prices should hit $2,400 by next summer.


Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.