Gold has a clear path towards $2,000+/oz –  TD Securities

According to analysts from TD Securities, after a period of stagnation during which gold prices may hover in the lower bound of the recent trading range near $1,700/oz, the yellow metal should see a resurgence in investor interest and move back on a path toward $2,000 and above. 

Key Quotes: 

“Spot gold has more than rebounded from the mid-March COVID-19 driven collapse and is now trading in a range near $1,700/oz. The yellow metal rallied along with risk assets following the reduction of extreme volatility, after the US Federal Reserve and other central banks announced measures to provide potentially unlimited support to credit markets and governments around the world provided countless trillions in fiscal support to keep consumers and corporations solvent. However, before prices move into a significantly higher range, a drift lower is a significant risk.”

“The resumption of the downward trend in real rates, which remain in negative territory, along with a low cost of carry and concerns surrounding fiat currency debasement as skyrocketing debt makes appealing various forms of debt jubilee in some circles, likely mean gold price could test TD Securities' target of $2,000+/oz in the latter part of 2021.”

“There is strong evidence that gold performs well when debt is skyrocketing.”

“A normalizing global economy and the fraying of global supply chains in the aftermath of the coronavirus crisis likely means that policy rates will continue to be set below the rate of inflation. This, along with monetization pressures as fiscal deficits surge in the US and across the world, should see investors choose the yellow metal as protection.”

“The current price range near $1,700/oz or a selloff in the near-term should be considered as temporary, with the previously discussed bullish macro factors eventually set to take charge. Further, the fact that some six million oz of annualized mining gold production is shutdown due to COVID-19 measures and lingering logistical issues making physical shipments extremely hard, will likely serve as additional catalysts moving the price toward $1,900/oz before the yellow metal reaches escape velocity toward a $2000+ handle next year."