August 2020 will go down in history for the financial world. In fact, in the first few days of the month, gold reached its highest price ever even in USD currency, surpassing the record price of $1,921 reached in September 2011.
Many laggard investors now fear buying the metal – despite being aware of its potential – because they believe that after this huge rise a big drop in prices is just around the corner. In reality, the largest investment banks in the world say the opposite: the gold rush is not over!
What brought gold so high?
It is no wonder if you look at the factors that led the gold rush to record its highest price ever.
First of all real rates are so low in the United States as well as in the Eurozone as to make investors feel cheated, who divested and opted for other investments, among which gold stood out in the front row that has been earning points for months.
Subsequently, the institutional traders played another good factor. There have been several banks and states that have stocked up on gold in the last few months, aware of how useful this metal can be for their balances if the economic crisis continues.
Finally, the fear of retail investors played an extremely important role. Lots of small individual savings converted into gold bars and ETFs which, together, have created huge amounts that have boosted the demand for gold. On the other hand, it is not difficult to understand. New deaths and new infections do not bode well for the future. Economies and markets are always affected in these cases and if you hold your money in this circle of fire, it is absolutely normal to be afraid about it.
The gold rush is not over according to the largest investment banks
According to analysts of the largest investment banks, the gold rush has by no means stopped. According to MPS Capital Services, US real rates will remain low to the same degree if not to a lesser extent, infuriating the relatively few brave investors who still have their money invested in bonds. Further interest rate cuts will occur almost automatically if central banks are forced to provide additional aid to states if new crises break out due to Covid.
Also according to MPS, the big question mark about the developments of the pandemic will bring more people within a few weeks from the bank of safe-haven assets.
Ultimately, the Italian bank strongly believes that gold can reach up to $2200 an ounce within a short time.
It is incredible to see how all the major investment banks have the exact same motivations regarding further rise in the price of gold. All of them have predicted super optimistic targets. Goldman Sachs, for example, sets $2,300 per ounce price target before the end of 2022 ($81,000 per kilo). Bank of America is even targeting $ 3,000 by 2021 (about $105,000 per kilo) and so on with other important institutions.
Further joys for gold holders seem to be on the horizon.