Degussa sees gold price rising to $2,500 by mid-2021 as central banks continue to print money
(Kitco News) - The gold market continues to hold on to critical support above $1,850 an ounce, but shifting investor sentiment following positive vaccine news in the last two weeks created significant pressure for the precious metal.
However, one European precious metals firm does not expect a vaccine for the COVID-19 virus to significantly change the course of the global economy.
"No doubt, there is a great deal of uncertainty about the future course of the world's economic and financial developments. However, it appears that the savvy investor has quite some reason to expect that interest rates will remain very low in the foreseeable future, simply because overall indebtedness has become too high. Central banks are unlikely to withdraw their support for the economies and financial markets in particular," said analysts at Degussa in a report published Thursday.
Degussa remains cautiously optimistic on gold's long-term potential, even as the precious metal currently struggles to attract new investors. In the report, the precious metals firm said it sees gold prices rising to $2,500 an ounce by mid-2021. The analysts said that they see a top-end range around $2,780, with a low end of the range coming in at $2,310.
"At current prices, our estimate implies an upward potential of around 30%," the analysts said.
Although a potential vaccine for COVID-19 is good news for future economic growth, the analysts said that the global economy has become too dependent on stimulus support and excess money printing.
"Under these conditions, it appears to be highly likely that the purchasing power of basically all official currencies – be it the US dollar, the euro, the British pound or the Swiss franc – will come under pressure. It is against this backdrop that the relative attractiveness of holding gold from an investor's viewpoint increases," the analysts said.
Degussa said that currency debasement continues to be a growing concern in the marketplace.
"The purchasing power of gold cannot be debased by central banks running the printing presses," they said. "Gold provides a hedge against the potential downfall of the unbacked paper money system – which, while it may not be around the next corner, is an event that carries a probability that is higher than zero."