Gold and the related exchange traded funds have been sluggish to start 2019. For example, the SPDR Gold Shares (NYSEArca: GLD), the largest physically backed gold-related ETF on the market and go-to option for gold exposure for many ETF investors, has traded barely higher.
However, some market observers see more upside coming for the yellow metal. Earlier this week, CIBC boosted its price target on gold to $1,350 per ounce from $1,300 an ounce.
“In a report Monday, market analysts at CIBC raised their price target for gold, looking for the yellow metal to average $1,350 an ounce this year, up from their previous forecast of $1,300. The bank sees gold prices averaging $1,400 an ounce in 2020,” reports Kitco News.
Gold may continue to shine in 2019. As the market environment shifts, some analysts believe that the depressing influences on gold that occurred during the before the last quarter of 2018 will not likely be repeated in 2019. Furthermore, gold will see continued investment demand among the emerging markets, along with increased demand for safe-haven plays across developed markets.
Higher Prices for Gold
“Slowing growth combined with lowered rate-hike expectations, Brexit uncertainty, and constructive demand-supply fundamentals for gold drive our positive outlook for precious metals demand over the next two years,” said CIBC.
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However, investors remain largely confident that the U.S. economy will still expand, which may benefit riskier assets like stocks. Furthermore, while gold has somewhat benefited from the dovish stance from the Federal Reserve since a lower-for-longer interest rate would weaken the U.S. dollar and support gold prices, the same Fed comments would also bolster stocks and other risky bets for the year.
“Looking at the factors to drive gold prices, CIBC analysts said that falling real interest rates as the global economy slows will have a significant impact on prices this year. The analysts noted that because of the softer growth outlook, they expect the Federal Reserve to raise interest rates only once this year,” reports Kitco. “However, they added that inflation will continue to creep higher, meaning real interest rates will remain low, a positive for gold prices, as it will keep the opportunity costs of holding a non-yielding asset low.”
Investors have added almost $926 million to GLD this year.
For more information on the gold markets, visit our gold category.