Gold prices have continued to pull back since they peaked in August last year as the epidemic improved and the continued economic recovery reduced demand for safe havens. So far this year, the focus has shifted to inflation, and gold prices have turned upwards since March. In the current context, a Wall Street strategist pointed out that gold is still a "relatively cheap" investment opportunity and is likely to continue to rise even if it breaks through $1900 an ounce soon.
"Gold rose amazingly last year, and when that trend reversed, I think it scared off some investors," Richard Kelly (Richard Kelly), head of global strategy at (TD Securities) at TD Securities, said on Thursday.
International gold prices are hovering near more than four-month highs. Spot gold fell slightly in early trading in Asia on Friday, trading so far at $1871 an ounce. Spot gold hit an all-time high of $2063 an ounce last August.
In the first few months of 2021, gold prices came under pressure. Meanwhile, Treasury yields have risen sharply and traders are betting that inflation will cause the Fed to raise interest rates and scale back loose monetary policy. Gold has traditionally been seen as a hedge against inflation, but any effort by central banks to control inflation is usually bad for gold.
Kelly also mentioned the link between gold and the dollar. Since gold is usually priced in dollars, any fall in the dollar could lead to a rise in gold prices. He believes that the dollar-and even other major currencies such as the euro-still looks relatively "expensive", while gold is still relatively cheap and definitely has catch-up potential.
He added that even if gold reached $1900, given the current interest rate policy, inflation dynamics, etc., gold prices still have room to rise.
What do other analysts think?
Jim Wyckoff, a senior analyst at Kitco Metals, also said inflation expectations were good for the metals market. "problematic price inflation has always been a positive for the metals market, as investors will buy hard assets such as metals as a hedge against inflation," Wyckoff added.
Minutes of the Fed's April meeting show that as the economy continues to recover strongly, some Fed officials seem ready to start considering adjusting the pace of asset purchases, which may not be a good sign for gold.
But Bart Melek, head of commodities strategy at TD Securities, said the minutes of the Fed meeting released on Wednesday "are actually the first time officials have talked about curbing quantitative easing." But gold still rose as we saw a slight fall in bond yields and the dollar. "
"the view of the market is that while the Fed is talking about tapering, in fact, we are unlikely to see a reduction in monetary easing any time soon," Melek added.
In addition, gold has also benefited from the recent turmoil in the cryptocurrency market. In a report to clients this week, JD Morgan noted that institutional investors are abandoning Bitcoin for gold. Bitcoin, known as "digital gold", is seen by some investors as a tool against inflation, but recent regulatory voices have rattled the cryptocurrency market.
