Gold prices have rallied to their highest levels in history this week, but its rally won’t last forever.
Business Insider spoke to a number of analysts this week to find out what could derail the precious metal’s record rise.
A Joe Biden presidency, the development of a useable coronavirus vaccine, and a stock market correction could all push gold prices lower, they told us.
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Investors all across the globe have rushed to buy gold pushing the precious metal to its highest level ever, but analysts think the precious metal, which has been regarded as the darling of financial markets in recent weeks, is simply not pricing in a number of bearish scenarios which could cause the gold price to crumble.
Yung Yu-Ma, chief investment strategist at BMO Wealth Management, said: “While a number of factors have converged in support of gold, the picture around year-end may show cracks.”
Gold is trading close to $2,000 per ounce after a diplomatic row between the US and China, the world’s two largest economies, worsened in recent days, pushing investors into safe haven assets.
The US ordered the closure of the Chinese Consulate in Houston and China subsequently ordered the closure of the US Consulate in Chengdu last week.
Relations between US and China were sour as it is in recent months after China enacted security legislation in Hong Kong and the countries engaged in a blame war over who is responsible for the coronavirus outbreak.
Business Insider spoke to a number of analysts to get their view on what could derail the meteoric rally of the precious metal in recent weeks.
A COVID-19 vaccine
The much sought after COVID-19 vaccine could come before the end of 2020, which may reduce investors need to rush into safe havens like gold.
“If an accelerated vaccine timeline comes to fruition the dark cloud over the global economy would begin to lift and the demand for gold’s ‘safe-haven’ quality would likely weaken,” Ma said.
A vaccine appears to be pretty close with virtually all of the world’s big pharmaceutical firms scrambling to be first to produce a working solution to the virus.
Rising interest rates and bond yields
Interest rates have been historically low with central banks slashing them across the world, to help businesses benefit from cheap money.
But Ma said: “While interest rates should still be very low around year-end, the narrative that they will remain low for the foreseeable future could begin to shift and dull some of the metal’s shine.”
Low or negative interest rates are typically positive for gold prices as it makes holding bonds less attractive, and therefore reduces the opportunity cost of holding gold.
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Ross Norman, CEO of MetalsDaily.com, said: “Currently you …read more
Source:: Business Insider