Significant downturn in economic growth and rising uncertainty over the political developments have helped gold become a new emerging bull market, with the price expected to rise to US$2,300 within the next 24 months, according to a Liechtenstein-basesd asset and wealth management firm.
Incrementum AG’s study, “In Gold we Trust”, said that the first step had already been taken and early this year gold celebrated an impressive comeback, exhibiting strong vital signs, and recording its strongest quarterly performance in 30 years, which was fuelled by fears over ‘the recovery of the post-Lehman economy’.
The positive outlook for the gold market was also driven by an increasing uncertainty about economic and political developments, further boosted by a renewed stimulus programme and the recent Brexit, which could accelerate further monetary and fiscal stimulus to counter further disintegration of the European Union.
Incrementum also noted that the strength of the American currency as the US recovered was a major contributor to gold and commodity weakness over the last few years.
However, the persisting low interest rate environment was leading to a revival in interest in gold investments on the part of institutional investors.
At the same time, this created a general positive environment not just for gold but for inflation-sensitive assets such as silver and mining stocks.
“After years of pursuing low interest rate policies, central banks have manoeuvred themselves into a lose-lose situation: both continuing and ending the low interest rate regime harbours considerable risks,”
“Gold is increasingly attractive in this environment. It used to be said that gold doesn’t pay interest, now it can be said that it doesn’t cost interest.”
“According to our perception the events of the past year are validating our views and we are maintaining our gold price target of US$2,300 by June 2018,” the report said.
