Gold market analysis via ABN Amro, in summary. First, updated forecast:
- year-end forecast is $1,900 (was 1,700)
- for end of 2021 is $2,000 (was 1,800)
Reasoning:
1. central bank policy is a strong driver behind higher gold prices
- official rates ... in a large number of countries … will unlikely go up in our forecast horizon
- (plus) quantitative easing
2. number of countries ... negative rates (official and/or government bond rates)
- Gold is not paying any interest rates. So negative rates are another major support to gold prices especially versus the euro
3. the US may not have negative official rates or government bond yields, but nominal rates corrected for inflation expectations (real rates) are in negative territory
4. governments ... large-scale fiscal stimulus to support the economy
- As a result, fiscal deficits in a large number of countries have risen substantially, even to double digit numbers. This development has made some investors nervous, especially in combination with the substantial amount of monetary policy stimulus
5. technical outlook is positive
- psychological resistance of $1,800 per ounce has been surpassed
- It seems that investors will only be satisfied if the former peak in gold prices at $1,931 per ounce is reached and taken out
- Above that the important psychological level of $2,000 per ounce is within reach
