A precious metals expert has said that he expects to see gold reaching $1850 by the end of the year thanks to institutional investor confidence in gold, concerns over the longer term impact of the Coronavirus and clear geopolitical hot spots in the form of Brexit, the phase two US-China trade deal – which is a hot topic due to China seemingly coming out on top of the phase one agreement – and Middle East tensions.
Everitt Millman says that there is also a great likelihood that economic policy will favour the precious metal, as the very real prospect of economic disruption from the Coronavirus could force the Federal Reserve’s hand. On Monday, fallout from the spread of the virus saw the Dow Jones index fall to its lowest levels in three months, while gold soared to a three-year high.
“There seems to be actual economic damage that could be happening because of the Coronavirus — China closing things off and other countries will probably be wary of trade. That is going to be in the back of the minds of FOMC members during this meeting because everything else would seem to be kind of the same as at end of last year… in terms of economic data.”
While it isn’t expected that the Feds will take immediate action when they meet this week, there could be a longer-term implication. Millman says, “I am not completely sold on the idea that the Fed will remain neutral for the whole year. That is unlikely. And if its rates are going anywhere, they are going down… [Gold] rallied quite a bit in a very narrow window of time. And usually, it is followed by a pretty big sell-off, which hasn’t happened since the rally started late last year. Ultimately, by the end of the year… we should rally up to $1,850 on the high-end.”
The bottom line? Buy now to put yourself in the best possible position for 2020