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Gold price won't push above $1,900 until 2022 - Murenbeeld & Co

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(Kitco News) - Not only has gold struggled to find enough traction to break above $1,800 an ounce, but one market analyst is warning investors they might not see $1,900 an ounce until next year.

In a recent interview with Kitco News, Chantelle Schieven, head of research at Murenbeeld & Co., said that while she is bullish on gold in the long term, the precious metal has some challenging headwinds for the rest of the year.

The research firm recently updated its gold forecasts for the second quarter, and it expects prices to average the second quarter at around $1,806 an ounce. Gold will see incremental improvements in the third and fourth quarters with average price of $1,827 and $1,865 an ounce, respectively.

Murenbeeld & Co doesn't expect gold prices to rise back above $1,900 an ounce until the first quarter of 2022 and the analysts don't expect prices to hit a new all-time high until the second quarter of next year.

goldSchieven said that she is relatively neutral on gold in the near term as central banks now appear to be in a holding pattern, waiting to see if all the stimulus they have pumped into the system will lead to a sustained robust recovery.

Schieven added that the latest spate of economic data does point to expectations of strong growth. However, she also noted that the Federal Reserve has been clear that they want to see actual growth and not react to forecasts. Schieven added that there is still a lot of uncertainty surrounding the path of the pandemic; it's not a given that the current pace of the recovery will be sustainable, she said.

For the gold market, another significant uncertainty holding the market back is if robust growth will lead to rising inflation, Schieven said.

While it's a given that base effects from last year's COVID-19 economic crisis will lead to higher inflation in the next few months, Schieven said that investors won't know until the end of the year whether inflation will be more than transitory.

However, Schieven added that with the amount of money government and central banks worldwide have pumped into financial markets and given directly to consumers, it's difficult to see how inflation won't see a sustainable rise.

Schieven said that she is paying close attention to the amount of money circulating in the U.S. economy, also known as the M2 money supply.

"We're starting to see that momentum. People are thinking about what they want to do, how they want to spend their money. We are definitely seeing it in the housing market. You can also see it in other essential commodities: copper prices, lumber prices, food crisis are all really rising. Even if some of that momentum subsides and moves sideways, you're still at a higher price level."

Schieven added that the rise in commodity prices is very concerning for long-term inflation pressures. Higher prices are increasing input costs for companies and they, in turn, are passing those costs onto consumers.

"Inflation is coming, but it could be two or three months behind producer prices," she said.

While inflation appears to be the biggest factor to drive long-term gold forecasts, Schieen said that it is not the only factor. She said that gold continues to be an attractive safe-haven asset as equity markets continue to trade at record valuation. She noted that rising inflation pressure could weigh on equities.

"We are already starting to see some volatility in equity markets and it wouldn't take much more to impact equity markets," she said.

However, on the downside, Schieven noted that along with an improving economy, the gold market continues to face tough competition with bitcoin. She said that according to her research, the rally in bitcoin has reduced gold's market value by 2.5%.

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.