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Gold prices ended the first week of the New Year higher despite a modest pullback on Friday.
“Gold prices edged lower Friday, after U.S. jobs data showed wages rising at their strongest pace in eight years… The data ‘supports the Fed’s decision to increase rates,’ said George Gero, managing director at RBC Capital Management.
“Looking forward, however, the data also suggests that inflation may be on the rise, Mr. Gero said. That may support gold, as some investors buy the precious metal when consumer prices rise, believing it will hold its value better than other assets….” (“Gold Prices Edge Lower After U.S. Jobs Data,” WSJ, 1/6/17.)
Gold ended the week up $21.30, closing at $1,173.20. Silver prices closed at $16.54, up $0.56.
Three Reasons Gold May Hit $2,000 - Zulfiqar
Writing for the financial newsletter Lombardi Letter, research analyst Moe Zulfiqar identified three factors which may send gold prices to $2,000 an ounce.
“Truth be told: we are moving toward a complex global economy. Pay attention to gold prices. The yellow precious metal could be the biggest beneficiary. Here are three things that are currently taking place that could have significant positive impacts on gold prices. They shouldn’t be ignored by investors, whatsoever.
“1. Disparity Among Central Banks … The Federal Reserve is the only central bank among major central banks that is raising its rates. Others are keeping them low and/or printing more money … This disparity among central banks could be very dangerous. We could see severe volatility as a result, and investors could find refuge in the yellow precious metal, hence much higher gold prices…
“2. Central Banks Constantly Buying Gold … Central banks used to be known as institutions that hated gold. Their sentiment since the financial crisis of 2008-2009, however, has changed completely. The central banks that didn’t have gold before the crisis have been buying it. Those that already had significant amounts of gold are hoarding it … Why are central banks buying gold? Know that gold brings down the volatility in their portfolios (foreign reserves). Central banks also have huge buying power, and they could take gold prices much higher.
“3. Volatility in Currency Market. If you haven’t noticed yet, it may be time to pay attention now: currencies around the world are witnessing wild swings… Don’t look at gold prices from a U.S. dollar perspective alone. Think global when looking at the precious metal. Lower currency value could lead to much higher demand for gold…
“I will be bold and say this: for every day that gold prices remain subdued, the precious metal becomes an even better opportunity. Looking at the fundamentals of the gold market, over the past few years, there has been a significant amount of improvement. And, there have been new developments that suggest gold could have a much brighter future ahead.
If you listen to the mainstream media, it will have you convinced that gold isn’t even worth a look. Ignore this rhetoric. Keeping everything in mind, I am not ruling out $2,000/ounce gold prices in the next few years. It’s possible.” (“Precious Metals: 3 Factors Say Gold Prices Could Hit $2,000 an Ounce,” Lombardi Letter, 1/3/17.)
Motley Fool Author Also Sees $2,000 Gold
Analyst Moe Zulfiqar is not alone in believing gold may reach a record high of $2,000 per ounce. The Motley Fool author Sean Williams is “confident” that gold will reach this new record based upon a number of factors.
“In recent weeks, though, gold has come under some of the steepest selling pressure it's seen in quite some time. In particular, gold has struggled since Donald Trump was announced as the winner of the presidential election on Nov. 8… it's my belief -- and feel free to put me on record -- that gold will hit $2,000 an ounce before $1,000 an ounce, assuming it even sees $1,000 per ounce again. Why am I so confident in this prediction? The following… factors tell the tale…
“Opportunity costs remain low. To begin with, the opportunity cost of owning gold remains fairly low… Opportunity cost is the act of forgoing a near-guaranteed return in exchange for another asset that offers the chance at a bigger return… With Yellen likely to be replaced as Fed chairperson in a little more than a year, the direction of Fed policy is still very much up to interpretation -- and that's good news for gold…
“The U.S. consumer is spoiled. Another component that favors gold is the real likelihood that the U.S. consumer has been spoiled with historically low lending rates for far too long. There's a genuine possibility that even a minor increase in lending rates could stall the U.S. economy…
“China and Brexit provide uncertainty. External factors could also be a driving force for gold. For instance, Britain's departure from the European Union is an event unlike anything we've seen before… It's possible Britain dips into a recession because of its exit, and it could bring the EU economy down with it… Slower GDP growth means less consumption from China's citizens, which presents a problem for countries, like the U.S., Germany, and Japan, which rely on exports to China. An uncertain growth outlook for China and Britain is a good thing for gold…
“History suggests it'll do well under Trump. Finally, history is on the side of gold optimists during the Trump presidency. According to CNBC, gold tends to outperform when Republicans are in the White House. Though past performance is, of course, no guarantee of future results, it's always possible we could see buy-and-hold investors step into owning gold based on that long-term trend.
“Mark it down, folks. With gold only $170 per ounce away from $1,000 per ounce, this Fool is calling for $2,000 per ounce.” (“Put Me on Record: Gold Will See $2,000 Before $1,000,” Nasdaq, 1/6/17.)
Gold Traders and Analysts Agree that Now is Time to Own Gold – Bloomberg
Bloomberg reported that its survey of analysts and traders agree that now is a great time to own gold.
“There’s one thing many gold traders and analysts agree on, now is a great time to own bullion.
“Those surveyed by Bloomberg this week were the most bullish in a year. They cited worries over political developments in Europe, and in the U.S. following Donald Trump’s election, as well as expectations of stronger demand ahead of the Lunar New Year. After posting the biggest quarterly drop in more than two years, prices are now heading for their best weekly performance since April.
“’The euro zone has plenty of crisis triggers over coming months; Indian and Chinese buying remain strong and Trump’s policy threatens inflation,’ said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland, which oversees $190 million. ‘All this is positive for gold…’
“Fourteen gold analysts and traders surveyed by Bloomberg this week were positive on the outlook for prices, while two were bearish and one was neutral. Demand for gold as gifts in China normally rises before the Lunar New Year, which this year starts at the end of January….” (“Gold Traders Most Bullish in a Year After Dire End to 2016,” Bloomberg, 1/6/17.)
New Gold Forecasts Target $1400 in 2017 – Money Morning
The editors of Money Morning believe gold will rebound in 2017, rising to $1400, and reach more than $4,000 per ounce in 2019.
“Gold is coming off a rough 12.1% decline in Q4 2016. But our newest gold price predictions show gains of 24% in 2017 and 451.4% by 2019 … Here's how high Money Morning Resource Specialist Peter Krauth – a 20-year veteran of the metals and mining market – sees gold prices heading this year…
“’With a new president bent on stimulating the economy through tax cuts and massive spending, along with a number of overbought markets, 2017 could turn out to be a strong year for gold,’ Krauth told Money Morning readers on Dec. 23. Gold prices will also soar from rising inflation… ‘As we see inflation ramp higher, that mindset settles in and people start thinking overnight that we're in an upward inflation cycle,’ Krauth explained. ‘I expect we could see $1,400 gold in the latter part of next year… ‘
“Here's why gold prices will more than quadruple from current prices over the next four years… If history is any indication, the price of gold could surge to $5,246 per ounce by 2019. That's an incredible 451.4% gain from today's price of $1,162.20 per ounce. You see, despite recent declines, gold prices are in a bull market…
“Even if the gold price moves lower in early 2017, it won't be enough to end the current bull market … And every gold bull market over the last 47 years has provided massive returns. The median length and return of every gold bull market since 1970 is 41 months and 451.4%, respectively. If we're technically 14 months into the bull market since the November 2015 bottom, that means gold prices could rocket 451.4% to $5,246 by Q1 2019.” (“2 New Gold Price Predictions Point to a 451.4% Gain,” Money Morning, 1/4/17.)