Edison Investment Research director Charles Gibson has said there is no end in sight for the gold rush, with prices expected to rise to $US1900 ($2730) per ounce and potentially as high as $US3000 ($4312) per ounce.
Gibson outlines this in Edison’s latest mining report, A Golden Future: The Outlook for Gold and Gold Equities, which examines the relationship between gold prices and historic monetary conditions.
According to Gibson, with uncertainty in the United States, low interest rates and global markets spooked, there is much to support high gold prices for the foreseeable future.
The report compares the current negative interest rates in the United States to a similar volatility between September 1979 and October 1980, which was gold’s “first great bull run in the period of flat money”.
“If the economic conditions of 1979 do indeed set a relevant precedent for the potential trajectory of current gold prices, Edison suggest that gold prices are likely to continue to rise until real interest rates move out of negative territory,” Gibson wrote in the report.
“Gold did not top out until real interest rates reached over 4 per cent in the latter half of 1980, and with the Federal funds rate unlikely to rise any time soon, it seems that only a persistently negative consumer price index might thwart gold’s continued uptick in price.”
This however is all subject to the evolution of coronavirus and the post-covid economic bounce back.
Gold’s performance has varied since the pandemic began, with prices falling by around 11 per cent in mid-March before recovering again to record price highs.
“The longer the crisis continues, the more entrenched its asset base will become and the more gold should tend towards its predicted level,” the report stated.
“If the coronavirus crisis persists and the Fed’s [Federal Reserve Bank’s] balance sheet stabilises or continues to increase, existing producers will capitalise on the increasing gold price.
“Gold, with its safe haven and monetary status has been an obvious beneficiary of the current uncertain environment and that seems unlikely to change for as long as the coronavirus remains a largely unknown quantity.”