Citibank: Gold Could Hit $2,000 As Investors Seek Protection From Coronavirus

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Written by Dana Sanchez
Gold is in the fear-of-missing-out stage. Prices reached a 7-year high of $1,600 per ounce this week. Some analysts predict it’s in a new bull market. Image in the public domain/Pixabay

Gold prices reached a seven-year high of $1,600 per ounce this week, and some analysts predict the start of a new bull market for it as investors seek out its safe-haven status in uncertain economic times. 

Analysts at Citibank Group Inc. said Wednesday that they believe prices could hit $2,000 an ounce in the next year, Financial Post reported.

“Although we have been bullish for an extended period, the pattern itself suggests a pullback is near,” Todd ‘Bubba’ Horwitz wrote in a Kitco commentary. “There is no reason to sell here; however, we wouldn’t be chasing gold higher with new money.”

Goldman Sachs said recently that gold prices could soon top $1,850 an ounce if the coronavirus outbreak can’t be contained by the second quarter, Marketwatch reported.

The coronavirus has killed 2,251 people and sickened 77,273, according to Worldometer.

Fears of economic fallout caused by the coronavirus and interest rate cuts by central banks could cause investors to hedge stock market risk by buying gold, Citibank said.

Other analysts agree that higher gold prices are here to stay.

Gold is now in the “fear of missing out,” stage, and “position traders are chasing gold equities and physical gold,” said Jeff Wright, executive vice president of GoldMining Inc.

“Gold has entered a new bull market and begun to internalize geopolitical, political, trade and growth risks, which is a constructive new development, compared to its responsiveness over the previous six year bear market,” said Nicky Shiels, Metals Strategist at Scotiabank, in a research report last month.

“Political/geopolitical & trade risk remains underpriced; that is especially important into 2020, as election risk rises, the business cycle matures and the frequency of off-calendar geopolitical events likely remains high,” Shiels said.

However, if Asian economies decline, that could keep prices down, Financial Post reported.

Anything related to Chinese manufacturing has been disrupted by the coronavirus, from antibiotics and tech products to auto parts. Economists and businesses worry about shortages of everything — a “supply shock.” In that scenario — high demand and low supply — expect prices go up.

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“Slowing physical demand in Asia, especially jewelry sales, which still take down roughly 45 percent of annual world supply, is a bearish risk for bullion,” the Citibank report said.

Other risks that could keep demand low include a reduction in stock market volatility as well as the prospect of more stable global trade.

“The uncertainty regarding when the global supply chain will return to normal is likely to continue to squelch trader and investor risk appetite for at least the near term. That’s bullish for the precious metals markets,” Kitco Metals senior analyst Jim Wyckoff said in a note.