Gold prices touched a 7-year high as more coronavirus concerns continue to fuel a safe haven flight to assets like precious metals. This, in turn, put gold-backed ETFs on watch.
Per a CNBC report, on Thursday the price of gold “rose to $1,621.60 per ounce, its highest level since February 15, 2013. On Wednesday, the metal settled at $1,611.80 — its highest settle since March 21, 2013 — and it’s currently tracking for its sixth straight positive session, and eighth positive week in nine.”
“So far … gold has demonstrated its safe-haven qualities and we stay long the metal,” UBS analysts led by Wayne Gordon said.
The firm’s analysts forecasted that short-term prices could test new highs—a move that could see gold top the $1,650 price mark in the next few weeks. UBS did, however, warn investors that any allaying of coronavirus concerns could limit price increases to the first quarter.
The CNBC report also noted that global investment firm Citi is “even more bullish. On Wednesday the firm raised its six-to-12 month target on gold to $1,700 per ounce, and said that gold could top the $2,000 level in the next 12 to 24 months. The firm said that some of the action in gold could also be due to other unknowns in the market, including the U.S.-China trade war, as well as the upcoming U.S. presidential election.”
The coronavirus is putting a mixed martial arts-like stranglehold on the markets and if it turns into a black swan event in China or other parts of the world, it could spark a gold rally.
“For gold really to move, it would be some kind of exogenous shock, which might push it higher,” Rhona O’Connell, INTL FCStone head of market analysis for EMEA and Asia Regions, told Kitco News.
“Such events are, by definition, difficult to predict, but we can think of a few possibilities,” said Capital Economics head of Global Economics Service Jennifer McKeown and assistant economist Bethany Beckett. We have long warned about risks to the Chinese property sector, related particularly to high levels of debt. Sales have already ground to a halt and, if they fail to pick up soon, the resulting pressure on property firms could trigger a wave of defaults,” the economists said on Friday.
Investors looking to get in on gold can look at funds like SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM). Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.
Traders looking for leverage can use funds like the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), VanEck Vectors Gold Miners (NYSEArca: GDX) and the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
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