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Wells Fargo Cautions Investors Against Buying Gold

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Wells Fargo Cautions Investors Against Buying Gold

(Kitco News) - Even though gold has survived the test of time as an excellent safe-haven asset, Wells Fargo is cautioning investors against getting too excited about the metal at current price levels.

“We caution investors … not to get too excited about buying gold today. At $1285, and fairly valued versus both stocks and bonds, we believe gold is no great bargain,” Wells Fargo head of real asset strategy John LaForge wrote in a note on Wednesday.

Plenty of supply and inability to hold on to gains triggered by market volatility are the elements working against gold, according to Wells Fargo.

“The global gold supply/demand balance also continues to tip in favor of too much supply. Should global volatility continue to spike, gold prices could too, but we doubt that gains can be held,” LaForge explained.

Despite the somewhat pessimistic outlook, Wells Fargo does not project any major losses for gold this year, stating that its 2019 target range is $1,250-$1,350 an ounce.

At the same time, LaForge praised gold’s safety and historic permanence in his note, highlighting its unique characteristics, which make it so appealing to investors.

“During periods of past market stress, investors have often turned to gold as a perceived safe haven asset. Gold is that one asset that has (as my 17-year-old daughter would say) literally survived time. Gold is impervious to air and water, meaning every ounce that has been mined in history still resides somewhere,” LaForge noted. “The best example is that gold’s combination of radiance, scarcity, and density has allowed it to act as a trusted source of physical money for centuries.”

The latest example of gold behaving just as it should was the metal’s attack on the $1,300 level this week amid renewed market volatility spurred by the trade tensions between U.S. and China.

“After a relatively calm start to 2019, global market volatility spiked last week, hitting many stock and commodity markets. Whether by coincidence or design, President Trump seemed to be center stage arguing with China and Iran over trade. All 11 S&P 500 sectors turned in negative performances last week, as did most commodity prices. Gold, on the flip side, was up about 1% on the week, which makes sense, historically speaking,” LaForge said.

At the time of writing, June Comex gold futures were trading at $1,296.60, down. 0.09% on the day.

Live 24 hours gold chart [Kitco Inc.]

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