Market and product

Following five days of volatility, gold was in the green on Friday (June 19) morning, on track to end the session 1.7 percent higher.

With the yellow metal edging above US$1,730 per ounce, analysts are forecasting a steady upward trend as concerns about stimulus and a weak US dollar drive investors to the sector.

A Goldman Sachs (NYSE:GS) report released this week projects that the currency metal will hit US$2,000 in the next 12 months as economies struggle with staggered reopenings and disrupted GDPs.

The firm expects an inflationary reaction to the COVID-19 response from central banks — but just how much is uncertain.

“For gold prices to go materially above US$2,000, we believe inflation will need to move above the Federal Reserve’s 2 percent target and this move to be met with a muted policy response,” it states.

For David Smith, the economic recovery will be more complex, a topic he touched on during his presentation at the digital MoneyShow last week.

The senior analyst at the Morgan Report warned of a period of stagflation similar to the one experienced in the mid-1970s.

“You have inflation and deflation going at the same time, but the underlying trait of inflation. Eventually, if the Fed keeps printing the amount of money that they are doing, we could have a massive inflationary move,” he said to listeners.

In this environment, gold is favored to perform positively, according to Smith.

“But in any of those circumstances gold will continue to do well because it’s a storehouse of value — it’s real money and it’s an opportunity to preserve your wealth as insurance first, profit second.”

Gold was trading for US$1,737.58 at 10:27 a.m. EDT on Friday.

Silver continued to trend higher, poised to make its fifth week of gains, despite headwinds mid-session.

The white metal has climbed 2.7 percent since late April and is benefiting from safe haven investor attention and growth in industrial demand. - investing news-