Now is the time to buy gold says Goldman Sachs. The leading investment bank said yesterday that it expects gold prices to reach $1600 before the end of this year.
The firm’s analysts point to increasing momentum for gold, noting that prices will be pushed by the growing perceived risk of recession – whether or not we do actually fall into recession territory. Mikhail Sprogis, who is an analyst at Goldman Sachs says the market’s fears will push gold upwards before 2020 explaining, “What’s important for the gold market is not whether there are actual risks but what the market’s perceived risks are. We noticed that the market’s fear of recession tends to go up with lower employment rate and slower growth.
“Given that this year we were moving into lower employment rate and the debate over the economy… We thought that this warrants more defensive allocation.
“Going long-term depends on what is going to happen to global growth. The further out you go, the higher the probability that the U.S. is going to hit a recession. We have $1,600 holding out through 2021. This is a scenario where things are not that bad. What we like to highlight is that in an environment where things do go much worse, we see much more upside in gold.”
In his briefing, Sprogis says that there is a trio of factors at work which will push gold higher. The first is a growing ETF demand thanks to a persisting low growth environment. The second is renewed central bank demand with a predicted increase from 650 tonnes last year to 750 tonnes this year – this increase is, says Goldman Sachs, fuelled by US tensions with those sparring with the Trump administration ramping up their stockpiling. A weaker US dollar is also aiding gold gains.
This trifecta is clearly going to be around for a while influencing gold prices – meaning buy sooner, rather than later.