Finance | July 21, 2020 6:14 am

Banks: “Only a Matter of Time” Before Gold Prices Hit New Record

When the economic forecast is bleak, investors tend to go back to an old standard

A pile of solid gold bars
Gold is the safety net investors go back to in a crisis.
Steve Bidmead/Pixabay

How do you invest wisely in a pandemic? Some may point you to Tesla, while others may recommend protective equipment manufacturers. But as Bloomberg reported, banks are forecasting record prices in the old crisis standby: gold.

“Gold is expected to climb to an all-time high in the next six-to-nine months, and there’s a 30% probability it’ll top $2,000 an ounce in the next three-to-five months,” Bloomberg wrote, citing analysts at Citigroup Inc. The bank even went so far as to say it’s “only a matter of time” before gold reaches a new high in the U.S., which was set in 2011 at $1,921.17 per ounce. 

It’s not only Citigroup making this prediction, either. As Forbes contributor Naeem Aslam wrote on Monday, “Goldman Sachs and a few other banks also believe that the spot gold price is going to challenge its previous all-time high.”

Why are we seeing this trend now? “The metal is benefiting from loose monetary policy, low real yields, record inflows into exchange-traded funds and increased asset allocation,” Bloomberg noted. In simpler terms, as Slate explained when the 2011 gold bubble burst, “gold prices tend to spike when there are serious economic, financial, and geopolitical risks in the global economy.” As COVID-19 rages on, the U.S. deploys federal agents in its own cities and the 2020 election looms, we’ve got all those risks and more.

If you’re wondering how this spike compares to gold prices over time, you can peruse a graph that goes back to 1989 courtesy of APMEX. While there were dips in the immediate aftermath of the 2008 financial crisis, the most significant long-term ramp-up follows that fallout. After 2011, there was a downturn until around the time Donald Trump was sworn in as president. Now, looking at the trajectory, Citi’s guess that it’s only a matter of time before gold hits a new high seems right on the money.

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