According to the latest annual report by Incrementum AG, the gold price forecast suggests that it could reach the $5,000 per ounce mark in 10 years from now.
Based on the gold rate predictions, for the gold price to approach $5,000 it is still a very conservative estimation. It is believed that the price of gold could even push as high as $9,000 per ounce by 2030.
Will the gold price take a more moderate or a more radical trajectory isn’t clear. The future gold rate development will depend heavily on inflation and the global debt situation. What’s certain is that the price of gold will continue to rise.
“The proprietary valuation model shows a gold price of USD 4,800 at the end of this decade, even with conservative calibration. Should money supply growth develop in a similar inflationary manner to that of the 1970s, a gold price of USD 8,900 is conceivable by 2030,” suggests the report.
The interactive Kitco gold chart supports the positive progression of the yellow metal, with Gold showing +14.70 today.
The authors of the report shared their view on the monetary systems by saying that they all have an expiration date in their current form. “Due to the expected economic and monetary turbulences, the coming years will hold many challenges for investors,” Stoeferle and Valek said.
It is important to note that in last year’s report, the authors made an observation that gold was at the doorstep of a new bull market.
Looking back at 2019, gold prices rose above $1,300 an ounce and since that point only continued to rise to the current price of gold today – around $1,700 per ounce. “Our gold price target of >USD 1,800 for January 2021 is within reach,” the report forecasts.
However, in the meantime, due to possible short lived occasions of optimism in the gold space, gold rates could still demonstrate bearish behaviour.
“From the point of view of current market sentiment, seasonality, and the CoT report, we would not be surprised to see a several-week consolidation phase,” Stoeferle and Valek explained.
Looking at the gold prices from a long-term viewpoint, the report forecasts gold breaking the historical record level. Taking inflation into account, once gold breaches the $1,920 point, it will climb further above $2,215 soon after.
“The question is not whether the gold price in USD will reach a new all-time high, but how high this will be. The authors are convinced that gold will prove to be a profitable investment over the course of this decade and will provide stability and security in any portfolio,” according to the report.
The COVID-19 outbreak and its consequences have rapidly altered the market playground by accelerating an anticipated recession.
“[The coronavirus] was then only the straw that broke the camel’s back … We are currently experiencing the most pronounced economic contraction in 90 years. The debt-driven expansion in the U.S. has been cooling off since the end of 2018, and gold analysts had already warned of darkening recession clouds last year. Measured in gold, the U.S. equity market reached its peak more than 18 months ago. COVID-19 and the reactions to it act as a massive accelerant,” the report stated.
Despite the resumption of the global economies, Incrementum AG doesn’t support the idea of a V-shaped recovery.
The authors of the report place their pessimistic view on the fact that the monetary policy normalization has failed, the results of which can already be seen in the increasing gold rates. This, in its turn, has serious consequences for inflation and debt management.
“There is unanimity among governments and central banks on how to combat the economic consequences of the Covid-19 crisis: As many people as possible should be saved, whatever the cost … The debt is now threatening to get out of hand for good,” the report noted.
The report suggests that after the COVID-19 outbreak, there is only one logical outcome – a global debt crisis.
“It will probably no longer be possible to finance the debt, as global savings volumes are no longer sufficient to cover the financing requirements necessary to keep the electronic printing press up and running,” the authors indicated.
It has been suggested that in the coming years, inflation will have become the “dominant investment theme”.
“Central banks are in a quandary when it comes to combating future inflation. Due to overindebtedness, it will not be possible to combat nascent inflation with substantial interest rate increases,” Stoeferle and Valek wrote.
This is all good news for gold because real interest rates will have to be kept below and under the positive line for a long time. Silver and mining stocks will also be the ones benefiting from this, the report added.
Many government bonds might be threatened and gold could potentially overtake the role that government bonds play in a portfolio.
“The interventions to combat the pandemic are overstretching the debt sustainability of many countries. Government bonds will increasingly be called into question as a safe-haven. Gold could take on this role,” the report said.
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