The price of gold hit another record on Monday, as investors continued to search for safe haven assets amid uncertainty in financial markets worldwide, and one analyst says we haven’t seen the end of the buying spree.
“We see the trend of gold still going up very, very strongly,” Martin Pradier, equity research analyst at Veritas Investment Research, told BNN Bloomberg in a Monday interview.
Pradier argued that gold’s recent popularity among retail and institutional investors has coincided with weakness in the American dollar as well as increased concerns around the “huge fiscal deficit” in the U.S.
“If the U.S. has this fiscal deficit that’s getting worse and all these problems with other countries, then central banks are buying gold and that trend has been very strong and that has pushed gold prices a lot higher and we see that continuing,” he said.
The precious metal was trading above US$3,400 an ounce for the first time ever on Monday.
In the current uncertain economic environment that’s subject to near-daily policy pivots from U.S. President Donald Trump, gold has thrived, since “chaos is its best friend,” Som Seif, founder and CEO of Purpose Investments, told BNN Bloomberg in a Monday interview.
He said that while central banks may have ignited gold’s rally over the past year or so, gold now has the support of a broadening group of investors.
“In the last year to date it’s been broader institutional, retail investor type of appetite, and all of that is in context and working together,” Seif said.
“So, gold and I’d say non-fiat-based assets are ultimately seeing a real focus as people look at alternatives to buying the U.S. dollar… people start to take their money out of the U.S. and say: ‘Where do we want to go?’ In the absence of a good idea, gold becomes something interesting.”
Pradier said that it’s difficult to predict the point at which gold’s rally will top out, but current conditions suggest a continued climb for the next few months.
He said there’s “plenty of room” for foreign governments such as China or Japan, the two largest holders of U.S. Treasuries, to convert more of their holding into gold, “especially if they don’t believe in the U.S.”
“That can take gold higher,” he said. “Can I tell you what the number is? Obviously not, but it can take it high.”
With files from Bloomberg News
