- The price of gold has reached a 7-year high as investors take refuge in safer assets in a context of liquidation fueled by coronaviruses.
- Some analysts say that the “level of fear” in the markets could push gold prices to more than $ 2,000.
- Assets such as government bonds and gold are generally considered to be safe havens for investors. In case of uncertainty and difficult market conditions, investors tend to rush their investments from the most risky assets to paradises.
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Gold prices jumped above $ 1,700 on Monday, hitting a seven-year high as a sale fueled by a coronavirus pushed investors toward safer assets.
However, analysts said the precious metal could continue to climb.
“Gold could go through $ 2,000 this year, especially after the Federal Reserve emergency action last week and the follow-up we expect from them,” said yield portfolio manager Clark Fenton diversified at RWC Partners, in a research note on Monday.
“It may seem that gold has already rebounded strongly, but investors have not missed their opportunity – we think it has a long way to go from here, not only because it is generally considered a safe haven but because the world has now fundamentally changed. ” We have never seen such low real rates globally, so investors will be forced to look beyond bonds to preserve their wealth, “added Fenton.
Assets such as government bonds and gold are generally considered to be safe havens for investors. In case of uncertainty and difficult market conditions, investors tend to rush their investments from the most risky assets to paradises. At 9:50 a.m.ET, gold was trading just under $ 1,700, down 1.25%.
Under current market conditions, gold has found itself near peaks while stocks and bonds around the world remain under pressure. Adrian Lowcock, head of personal investments at Willis Owen, said the coming weeks were “potentially critical” for investors, particularly as the spread of the coronavirus and the way governments and businesses are coping with it.
Lowcock predicted that the level of fear in the markets “could push gold to $ 2,000”.
“What we can see is that the level of fear in the markets is at extreme levels that we have not seen since the financial crisis and that there are very few financial institutions and investors professionals in the short or long term to reassure the markets. So, if the situation deteriorates there is a very real possibility that the price of gold can continue to run in recent months, and it could even cross the level of $ 2,000. “
Oil prices, stocks, bond yields and cryptocurrencies plunged on Monday after Russia refused to join other oil producers to cut production in response to the new coronavirus, sparking a war of price.
Investors have sought refuge in US government bonds, driving up prices and driving yields down, and expect an increased fiscal and monetary response to the coronavirus crisis. Last week, the Federal Reserve lowered emergency rates by 50 basis points, and investors are waiting to see if other central banks will follow suit.
“Backing off from recent price action, we believe macroeconomic conditions remain positive for gold. Monetary policy is easing globally, and the Fed is expected to cut rates further. Uncertainty remains high as the global economy faces the COVID-19 epidemic. On the contrary, we believe the rationale for holding gold is becoming even stronger, “said Joni Teves, strategist at UBS, in a note. research at the end of last week.