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Gold prices holding fast in the face of equity market headwinds

Kitco News

(Kitco News) - What a week for American equity markets.

All three major indexes hit record highs this week, all in the face of growing uncertainty regarding the health of the global economy as the coronavirus continues to spread and dominate headlines.

However, while most people are focused on equity markets, I would like to point out the gold market. The yellow metal is ending the week with a loss. Still, despite all the headwinds, the prices continue to hold above initial critical support coming in around $1,550 an ounce.

“The safe-haven metals bulls have stabilized their markets late this week, despite rallies in global stock markets this week,” said Kitco.com’s senior technical analyst Jim Wyckoff.

Even a standout U.S. employment report, which showed that 225,000 jobs were created in January, has had a limited impact on gold prices ahead of the weekend. This performance highlights comments I have heard from many different market analysts.

Many people I have talked to said that just underneath the bullish sentiment in equity markets is massive uncertainty and this is what continues to support gold prices. Although investors are jumping into the equities waters with both feet, they are not letting go of their gold.

Gold’s allure as a safe-haven asset can be seen in the latest data from the World Gold Council (WGC), which noted that holdings in gold-backed exchange-traded products (ETP) hit a new record high in January. The total value of assets under management from all the gold ETPs is just 2% down from their 2012 record highs.

But it’s not just retail investors; central banks are also getting into the game. In an interview with Kitco News’ intrepid leader Daniela Cambone, Juan Carlos Artigas, director of investment research of the (WGC), noted that governments are also interested in diversifying their holdings.

“Central banks also cite safety and diversification in reasons why they invest in gold, and in some sense, gold is an asset that can protect their reserves over the long term,” Artigas said.

Jerry Hicks, sales and business development manager at Perth Mint also talked about central bank demand with Cambone and said that it has been the biggest story in the gold market for the last ten years.

So, in this environment, the question remains: how high will gold prices go this year? According to the LBMA’s annual survey, analysts see gold prices averaging the year around $1,550 an ounce; silver prices are expected to average $18 an ounce.

The most bullish vote among analysts voting in the survey was Ross Norman, an independent analyst who called for a gold price of $1,755 an ounce.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.