Price Futures Group’s Phil Flynn discusses the price of gold and the state of the economy overall.
Gold prices surged following the U.S. airstrikes against Gen. Qassem Soleimani, head of Iran’s elite Quds Force, late Thursday.
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The yellow metal jumped over 1.5 percent to $1,552 an ounce as investors dumped riskier assets, such as stocks, for the safe haven of precious metals.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GLD | SPDR GOLD SHARES TRUST – EUR ACC | 143.95 | +1.05 | +0.73% |
Even before the attacks, the investment picture for gold was bullish after it registered its best year since 2010, and strategists expect that to continue.
The precious metal surged 20 percent last year to its biggest annual gain since 2010, according to Dow Jones Market Data, as a deceleration in global growth caused central banks around the world to slash interest rates.
“Going into 2020, we remain constructive on gold as late-cycle concerns, heightened political uncertainty coupled with only a modest growth acceleration should, in our view, support investment demand for gold,” wrote Goldman Sachs’ Commodities Research team led by Jeffrey Currie. The firm expects gold to climb 5 percent this year to $1,600 an ounce.
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Central banks cut rates a total of 131 times in 2019, compared with just 21 rate hikes, according to cbrates.com. The rate cuts came as the global economy grew at a 3 percent pace in 2019, according to the International Monetary Fund, the weakest since the financial crisis.
In an effort to combat the slowing global economy, the Federal Reserve, at its December meeting, said it expects to keep rates steady throughout 2020 before raising them once in 2021.
The Fed’s preferred inflation measure, the core Personal Consumption Expenditures price index, rose 1.6 percent year-over-year in November, which was considerably below its 2 percent objective.
A weaker U.S. dollar and macro uncertainties related to the upcoming presidential election and geopolitical risks make gold a “buy from a thematic angle, particularly on dips,” according to the Swiss lender UBS. The firm’s global wealth management team also thinks gold will hit $1,600 an ounce in 2020.
But not everyone on Wall Street thinks gold will grind higher this year.
Bank of America’s Global Commodity Research team says the Fed’s rate cuts and promise to remain on hold this year could lead to an “uplift in U.S. inflation” that could also be accompanied by “higher long-term interest rates.”
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The team has a 2020 price target of $1,494 an ounce, or 2.2 percent below current levels.
