During the year 2019, the evolution of the price of gold created a surprise for many investors with a basic upward trend that allowed it to gain nearly 20%. However, most analysts expect this upward trend to continue for the year 2020. The recent Iranian crisis has indeed allowed the precious yellow metal to hit new records. Let's discover together some tips and explanations on this subject.
While gold has always been considered a safe haven against the vagaries of other financial markets, the fall of the dollar or inflation, it gained many points during major financial crises such as between 2009 and 2011 with a 135% increase.
But today, the elements that influence this value are quite different. In particular, production has been relatively stable in recent years in the face of a significant increase in demand. Indeed, traditional consumption demand from households and therefore for jewellery as well as demands from central banks, which concerned 20% of production in 2019, are currently on the rise. This concerns emerging countries in particular, which are seeking to reduce their dependence on the dollar.
Finally, it should also be noted that real interest rates, which are kept close to zero, are one of the main factors stimulating the price of this precious metal. We know that the lower these interest rates, the higher the price of gold.
It is therefore understandable that the significant fall in interest rates during the summer of 2019 led to a rise of nearly 20% in the price of gold on the London spot market, with a price above $1,500 per ounce. There is a renewed interest in gold by institutional investors at the moment. With yields on top-rated bonds close to zero or negative, gold is regaining its competitive appeal for asset diversification strategies.
If gold prices have risen sharply in 2020, it is questionable whether it can rise further in 2020 and in particular whether it can still approach the historical high of $1,900 per ounce as it did in 2011.
According to analysts, the market outlook has not really changed in recent years and the potential for gold to rise to $1,900 per ounce remains strong over an 18-24 month horizon.
In particular, the high level of indebtedness of the economies is expected to keep interest rates low, even though stimulus policies could help to restart inflation. It is therefore advisable to buy gold.