Correction in precious metal prices

Correction in precious metal prices

19 August 2020 from Anna Svahn

The gold price passed USD 2080 per oz, or just over 30% YTD and then fell back to levels below USD 2000 per oz again. In the long run, the outlook for gold remains bright, and the fall below USD 1,900 per oz may give long-term investors a good opportunity to enter lower levels.

It was only a few weeks since the gold price passed $ 1900 per oz and eventually the all time high in most currencies. The rise, which was largely due to monetary easing and stimuli without promises of a close, has been justified, but as with all sharp rises, corrections are also seen, something that both shakes off weak hands and gives more long-term investors the chance to buy more gold at lower levels. . If you still look at gold from a longer perspective, it is difficult to say that the metal has not performed.

In addition to gold, silver also fell, which lived up to the nickname "gold on steroids" when the price fell from almost 30 USD per oz to at least just over 23 USD per oz, or almost 23 percent from the peak last week. If we zoom out a bit, buyers of silver have still made a good deal, just a month ago, silver was traded around 18 USD.

The crash in precious metals, not least in gold, was the biggest we've seen since 2013. And now the question is how far down we are going, or if we have already rebounded from the bottom and will test higher levels again. If the gold price stays above levels around 1850 USD per oz, it is not unreasonable to think that we will see another test around the level of 2100 USD. If we do not, it is possible that the gold price will continue to fall back to even lower levels around 1700 USD and then bounce up again.

Regardless of how the short-term case looks technically, the long-term, fundamental case could still be intact. Admittedly, the Fed seems to be trying to hold on for as long as they can before possibly lowering the interest rate to 0%, which would weaken the USD and give further impetus to the gold price. Even if this does not happen, we see continued trends for stimulus packages, and the economy is far from recovering after the pandemic, which also gossips that the rise for gold is far from over.

Another factor that also speaks for the gold price in the future is the increasingly strained relationship between China and the United States. Even if geopolitical unrest belongs to what can be called "noise" in the sense of the gold price, it can still contribute to the price rising sharply again.

For those who understand what fundamentally drives the gold price, the dip of recent days is a perfect opportunity to expand their gold holdings, or navigate right among streaming companies and mining companies to possibly add dividends to their gold exposure.

 @Anna Svahn


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This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

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02/10/2022 18:29:52


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