Gold has been one of the hottest commodities in the market this year, and many industry experts believe it will continue its hot run.
This year, the value of the yellow metal has been up by 19 percent. It even went past the $1,280 per ounce level for the first time since early last year. To put things in perspective, the Dow Jones Industrials Index is performing poorly, down 2.7 percent for the year to day. Even tech-heavy Nasdaq Composite which features players like Apple is faring worse, down by 7.2 percent.
While gold has tapered off a bit, down by 0.47 percent at $1,261 an ounce last March 8, there’s still hope that the next European Central Bank meeting can boost the metal further as ECB president Mario Draghi has hinted of further intervention.
German firm Commerzbank is even predicting that gold will reach its peak of $1,300 which last happened in January of 2015.It added that if economic fears strengthen further and turbulence on equity markets happen, there’s even a possibility of higher gold prices.
The German bank added that what is remarkable with gold’s impressive run is that it is happening with global stock markets remaining stagnant. It added that even the recent US economic data which showed robust growth in employment has not put any pressure on the yellow metal, either. The lackluster performance of the US dollar has also been boosting the steady growth in gold value.
Commerzbank also notes that private homes in China and India will continue to boost demand for gold. The World Gold Council noted that gold demand in China was pegged at 984.5 tons, while 849 tons were recorded in India. Most of the demand was for use in jewelry.
In fact, jewelry demand in India has been very impressive, rebounding in the second half of 2015 according to UK-based precious metals consulting firm Metals Focus.
The World Gold Council explains that the demand for gold in India was evident during the months of November and December, when the five-day Diwali festival heralding the start of the wedding season began.
US Economic News
Experts are also anticipating that the latest US economic quarterly report can have an impact on the value of gold. The market is anticipating nearly 200,000 new jobs, and anything lower than that would be bullish for the yellow metal.
An HSBC analyst, James Steel, was recently quoted as saying that even a good jobs number in the US will not be enough to deter the momentum of gold. He added that it would take a markedly positive jobs number to seriously dent gold’s run.
Investors are expectedly holding on to their gold investments. As of the first week of March, holdings in gold ETFs increased by 8.25 tons to 1,759.1 tons.
The yellow metal has also benefited by central banks in Europe, Sweden, Switzerland, and Japan moving their interest rates into negative territory. Gold has rallied because the financial markets interpret it as an indication that central banks are running out of alternatives.
With central banks moving their interest rates below zero, the euro and yen could become weaker. This increases the allure of gold because the metal is an alternative form of currency.
Central banks in various countries have also been increasing their gold reserves. In 2015, official sector purchases amounted to 588 tons per the World Gold Council. These purchases were largely made by the Chinese and Russian central banks.
Even Canadian businessmen and gold investor Pierre Lassonde believes that gold prices will go through the roof this year.
He makes an even bolder projection—that gold could surge to $8,000 per ounce or even higher. He said that today is the best time to buy gold.
Lassonde is the current chairman of Franco Nevada, and a former chairman of the World Gold Council.
Another market watcher, French investment and bullion bank Natixis, believes that gold will be up to 18 percent stronger this year than previously thought. The company believes this will be due to the weakening global growth and the central banks’ move to negative interest rates driving gold investments.
Natixis precious metals specialist Bernard Dahdah had earlier correctly predicted the average gold price to the dollar in 2015. This time, the specialist has raised his firm’s full year forecast to $1150 per ounce, or an increase of 18 percent from its original prediction of around $970 for 2016.
The specialist says that higher gold prices will be driven mainly by central banks moving their interest rates below zero and prospects that the Fed will raise rates at a slower-than-expected pace.
The bottom line is almost all experts agree that the good performance of gold will continue this year, making the yellow metal one of the best performing commodities in the market.