Coronavirus Pushing Gold Towards All-Time Highs

As fears grow around the globe, investors are moving heavily into gold. Here’s why analysts from Citi say the yellow metal can reach $2,000 in 12-24 months.

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According to Citi’s team of analysts, the coronavirus outbreak could be the launching pad to push gold above its all-time high of $1,900 sooner than expected. The yellow metal posted its best performance in six years in 2019, overcoming a key resistance level in $1,500 and gaining roughly 20% during the 12-month period.

Gold continued to barrel into the New Year as military tensions pushed the metal above a seven-year high of $1,600 before tracing back and remaining perched above last year’s high of $1,553. Now, gold has pushed through the $1,600 level with considerable force as investors ponder the possible ill effects that the pandemic could have on global growth, via CNBC.

Concerns regarding the impact of the coronavirus on global growth seemed to materialize last week, as Apple, one of the highest-earning companies in the world, announced that it would miss its quarterly revenue mark due to supply and demand issues largely related to the spreading of the coronavirus in China. Investors were quick to jump to safety and push gold above $1,600 on the same day. The metal’s high of $1,648 during Friday’s trading session isn’t too far off from Citi’s short-term prediction, as the team places its six-to-12 month forecast for gold at $1,700.

The real gains, according to the team, will come over the next 12 to 24 months as the same issues that have powered gold’s exceptional bullish run in 2019 become even more prominent this year, especially when paired with the potential effects of the coronavirus pandemic.

Last year, gold soared as the Federal Reserve and many other central banks turned dovish and began slicing interest rates. In the Fed’s case, the successive rate cuts came as a response to the U.S.-China trade war, a long-standing source of worry that intensified fears of a domestic recession.

As per Citi’s team led by Aakash Doshi, investors are pricing in a minimum of one rate cut this year, and global growth continues to linger in a state of contraction. These factors alone are powerful enough to keep gold’s bull run going, but Doshi noted that there is even more upside to the metal.

The analyst said that gold’s performance since the start of the year reflects growing concerns over the true state of the U.S. business cycle, which were present through much of the previous year. Furthermore, the upcoming U.S. election will add another degree of uncertainty that is almost sure to serve as a strong tailwind for the metal.

Persistent questions surrounding the effects of the U.S.-China trade war are likely to become prevalent as China’s economy and global exports begin to feel the effects of the coronavirus crisis. Paired with the new environment of negative-yielding or otherwise flimsy-looking bonds that have all but eliminated one of the few havens available during a time of a flight to safety, Doshi and his team are certain that gold can break its own record and push above $2,000 an ounce over the next 12 to 24 months.