(Kitco News) - The gold market has seen a solid break above $3,000, and although it is experiencing strong momentum, one market analyst is not yet ready to change her forecast, as higher prices could have an unexpected impact on the precious metal.
In a recent interview with Kitco News, Chantelle Schieven, Head of Research at Capitalight Research, said she is maintaining her initial forecast for gold to reach a high-water mark of $3,200 an ounce this year. However, she added that despite potential volatility, the precious metal remains in a solid uptrend.
“I think we get above gold’s inflation-adjusted highs, but I don’t see that happening this year,” she said.
Schieven noted that gold’s inflation-adjusted all-time high, dating back to January 1980, is around $3,400 an ounce.
Although Schieven is bullish on gold this year, she said it is difficult to predict how a recession will impact the precious metal. She explained that during economic downturns, investors often sell gold to raise capital and cover equity losses.
Gold prices are now up more than 15% so far this year. At the same time, the S&P 500 has declined nearly 5% year-to-date. The broader equity market index is down 8.5% from its all-time high last month.
Schieven expects the global economy to continue struggling in response to President Donald Trump’s ongoing support of America-first policies, including tariffs on imported goods, which have fueled a global trade war.
“There was a lot of economic uncertainty before Trump was even elected, but he came in, looked around, and said, ‘Hold my beer; watch what I can do,’” she said. “We are going to see a slower economy because nobody can make any long-term business decisions. Nobody knows what is going to happen next. Unfortunately for gold, it really doesn’t perform well at the start of a recession.”
Schieven also noted that gold could face some short-term challenges as Trump’s isolationist policies have forced Europe to increase its spending. Significant investment capital has flowed into Europe in recent weeks after the European Union announced it would provide member nations with access to roughly $1 trillion to boost defense spending and infrastructure.
On Tuesday, Germany’s parliament voted in favor of spending €500 billion—an unprecedented level of expenditure—to strengthen its military and improve infrastructure.
However, in the long term, Schieven said this will continue to reinforce gold’s role as an important monetary asset.
“The more uncertainty the U.S. creates, the less power the U.S. dollar holds as the world’s reserve currency,” she said. “Gold will play an important role in a world where you don’t really have a dominant reserve currency.”
Schieven expects central banks to continue buying gold and diversifying away from the U.S. dollar, which she believes will create a solid price floor in the marketplace.
“I do expect to see a pullback in gold at some point, but many will see that as a good buying opportunity,” she said.
