Analysts at fund management firm Incrementum AG believe that gold is on course for a 10-year bull run that could see it climb to almost $5,000 per troy ounce within the next 10 years.
The company released the 2020 edition of its respected “In Gold We Trust” report and made its case for both gold and silver to see significant price rises across the next decade.
The report is quick to point out that the coronavirus has only exacerbated weaknesses already showing in 2019, and in particular they point to interest rates being cut multiple times by the US Federal Reserve last year after 10 years without cuts. Growth and trade was falling in many countries throughout 2019, and recession was already of concern even while stock markets hit all-time highs.
They described the current pandemic as merely the straw that broke the camel’s back, one that has pushed the global economy into the worst recession in 90 years. In reaction to this unprecedented situation central banks are pouring more and more liquidity into the global economy in a last ditch attempt to try and avoid this recession turning into a full blown depression.
The report warned that the world could be entering the final phase of a super debt cycle that will inevitably have to be accounted for at some point, and that the increasing levels of national debt will lead to inflation.
With gold proven to act as a hedge against inflation this will see demand continue to grow even beyond recent surges. The questions of sustainability surrounding this national debt will also call into question the safe haven status of government bonds, and that more investors will turn to gold and silver as an alternative to bonds in that case.
Despite booming stock markets, and coronavirus an unknown factor, there was still an 18.9% rise in the gold price in Dollars during 2019 alone. With the impact of the virus only just now beginning to be felt, it would certainly seem a fair assumption to expect significant gains to come.
Incrementum’s models put gold reaching about $4,800 per troy ounce by 2030 as the most likely outcome. This is based on historic data, using the monetary base of the US and then fed into modelling programs. This would see gold gain a further 155% from its current price over the course of the next ten years.
Although this may sound like an improbably high figure, historical data does support the possibility. Indeed, in just the three years between the financial crisis of 2008 to the price peak in 2011, gold gained 158%; rising from $734 in October 2008 (in a similar margin call sell-off scenario experienced by gold in March of this year), up to the current record of $1,896.50.
Given this recession is expected to be worse, then it would certainly seem plausible for gold to hit this figure, and potentially ahead even of Incrementum’s prediction of 2030. The uncertainty surrounding Covid-19 and its economic impact of course makes long-term forecasts such as these even more difficult than normal and should only be taken under consideration rather than as any kind of certainty.
With many other analysts expecting gold to reach $3,000 per troy ounce by next year, and countries like the UK releasing their worst GDP results in history, it does appear to be a case of how high rather than if gold will increase.
