Gold is worth buying with a 5-year view
Is not buying gold now a loss-making decision? Andrey Vernikov, Head of Investment Analysis and Training Department of IC "UNIVER Capital" answered the question of Fortrader magazine.
- Gold is an attractive asset for an investment period of 5-7 years. Investments for a term of one year do not make sense, because the dynamics of the "yellow metal" is tied to the real yields of U.S. government bonds and the strength of the dollar. These two components largely depend on the Fed's monetary policy decisions.
Now inflation is on the rise all over the world, and it would seem that gold, as an anti-inflationary asset, should be on its game. But there is another side to the "medal". The acceleration of inflation scared the U.S. Federal Reserve and officials began to speak out about curtailing loose monetary policy. This has led to a strengthening of the dollar. The dollar has been strengthening against the euro since July of this year, which is an unfavorable scenario for gold.
At the beginning of the coronavirus pandemic, gold as a protective asset was in demand. But at the moment, the world economy is growing by leaps and bounds, and the initial shock of the emergence of Covid-19 has passed. Every day there is positive news on the epidemic: one corporation, for example, has developed a pill to treat it. So there is no reason for investors to rush to buy gold as a defensive asset.
Another reason why gold is not rising is because "new investors" are entering the market. For young speculators, gold is "granny metal," and they believe that the role of the metal is performed by . Especially since U.S. regulators have said they will not ban .
For long-term investors, gold is interesting for 5 years. I think it will be worth at least $2,600 an ounce by then, but you have to be patient.