With low-interest rates and inflation running high, analysts are looking to add new long-term gold positions.
Gold prices are set to spring higher after more than a month of moving sideways, according to Fox Business.
Drivers include a positive technical backdrop and the likelihood of sustained low-interest rates in the world’s largest economies that may prompt investors to seek better returns in other safe-haven investments.
Gold has “worked off the momentum, sentiment and positioning extremes seen at the peak and looks set to resume its uptrend,” wrote Laurence Balanco of Hong Kong-based capital markets and investment group CLSA Ltd.
Gold has surpassed the $2000 an ounce price in August 2020 and shortly after plunged to spend the past few weeks trading in a tight range between $1,900 and $2,000.
More recently, price action has managed to break the downtrend off the August high while also holding above the 50-day moving average. With prices still fluctuating, investors see a prime opportunity to acquire gold at scale.
The upbeat technical backdrop is getting an assist from monetary policy. The Bank of Japan held its key rate at -0.1% and warned the economy remains in a challenged state but is showing some signs of recovery. The Bank of England also kept policy on hold on.
The announcements come after the Federal Reserve held its benchmark interest rate at a range between 0% and 0.25% and said it expects to keep rates low through 2023 while navigating the U.S. economy through its sharpest slowdown of the post-World War II era.
The Fed is also announcing new stress tests before the end of the year.
According to Wall Street On Parade, the Fed announced that because of the pandemic and unprecedented economic downturn, it would require additional stress testing of the biggest banks later this year.
Among the various hypothetical scenarios that the banks will have to perform against, 13 of the banks with significant trading operations will have to consider what would happen if a major counterparty blew up. The banks that will have to submit outcomes under this scenario include Bank of America, Bank of New York Mellon, Barclays US, Citigroup, Credit Suisse, Deutsche Bank USA, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, State Street, UBS, and Wells Fargo. The Fed will release bank-specific results before the end of the year.
Knowledgeable investors are taking advantage of this new momentum to acquire as many precious metals as possible so they can see a significant return in years to come. For any questions or concerns, feel free to speak to one of the seasoned specialists at Allegiance Gold.