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The gold market just needs a little push

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(Kitco News) - We have finished another week in the meat grinder with gold prices going nowhere fast. The precious metal is eking out a nearly 1% gain for the week after traders were once again disappointed by the Federal Reserve.

Wednesday, the U.S. central bank released its updated economic projections; the Federal Reserve expects to keep interest rates at the zero-bound range for at least the next two years. This is good for gold’s long-term prospects but right now investors and traders are anxiously waiting to see what will drive prices back up and through $2,000 an ounce.

In that sense there was a lot of disappointment after the Fed meeting because there was no hint that more stimulus is coming anytime soon. Federal Reserve Chair Jerome Powell noted a few times during the press conference that the committee saw the current monetary policy stance as appropriate.

Many analysts I have talked to said that baring new stimulus measures, gold will remain range bound. 

However, the good news is that many economists and analysts expect that it’s only a matter of time before central banks step back into the market due to renewed uncertainty over economic growth in light of the ongoing pandemic.

“The done-deal nature of continued central bank easing is a solid foundation for gold, said Bloomberg Intelligence senior commodity strategist Mike McGlone in a report this week.

I think Lloyd Blankfein, former chairman and chief executive officer at Goldman Sachs, provided investors with the best outlook on gold. He talked about the precious metals during a virtual fireside chat hosted by CME Group.

“It has been so long since these metals have played a role in financial markets as a store of value,” he said. “But if there was ever a time where they would, it would be now.”

I wanted to end this week by highlighting David Lin’s interview with a legend in the precious metals market, Pierre Lassonde, chair emeritus of Franco-Nevada. Lassonde retired from the precious metals streaming company earlier this year but he is still active in the sector.

He reiterated his long-term forecast for gold prices to push to $20,000. He also said that there is still plenty of value in mining stocks.

“You haven’t missed the boat at all, even though the gold stocks are up double from the bottom. At the bottom, six months to a year ago, the stocks were so cheap that nobody was interested. It’s the same old story in our space. At the bottom of the market, there’s never enough money, and at the top, there’s always way too much, and we’re barely off the bottom at this point in time, and there’s a lot to go before we reach the top,” he said.

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