Thus far this year, things are looking upbeat for gold. Gold and gold equities have surpassed all other major asset classes and are expected to keep pace for the rest of the year. Indeed, the precious metal’s stellar performance has caught many market analysts by surprise, especially since gold hasn’t had a first quarter as lucrative as 2016’s since 1986.
“That gold has held up is a good sign and vouches well for further increases,” said Rolf Schneebeli, CEO of Gold Services AG. “There is certainly a good chance that gold reaches $1,500 by year end.”
Investor apprehension following the Brexit vote is a prominent reason why gold is continuing to do well into the summer. Investors have been gravitating towards assets that retain or increase in value during uncertainty, and historically, investors consider gold a safe haven asset.
Gold’s positive performance since the beginning of the year can be attributed to a variety of factors. However, steadfast global demand has been the biggest contributor in helping the gilded metal carve out a durable price floor in the general vicinity of $1,100 to $1,350 per ounce (in mid-July, the price was $1,329 an ounce).
The record-setting first quarter that has set gold on its upward trajectory can also be credited to global oil instability and international market volatility. “When markets go into a panic, traders will buy up gold,” notes a recent report from Zacks Investment Research. “In a fearful market, investors will avoid most assets involving paper money and turn to things that are material, just in case this is the time the world ends.”
While gold set record gains in early 2016, it’s uncertain if it will rebound to its 2011 highs, when the precious metal was worth more than $1,900 an ounce. Despite reaching close to $2,000 an ounce on August 22, 2011, the price of gold quickly fell by $105 the next day and continued to decrease until it began to slowly climb again in late 2015. This time, it appears the gains are built on a stronger foundation and aren’t as meteoric as in 2011, which gives hope for sustained performance.
One person who isn’t worried about the future of the yellow bullion is Goldcorp Inc. Chairman Ian Telfer, who has built his more than three decade business career in establishing and growing successful mining companies.
“Gold will always be in demand. It has been around for thousands of years and it will continue to be, in part because it is associated with luxury,” Ian Telfer says.
The Canadian gold executive points to the increase in gold demand around the world as proof that gold is resilient and wanted on the world stage.
“I have been involved in the gold industry for almost forty years and I have seen it fluctuate and ebb and flow, but it always rallies back,” continues Telfer.
As Ian Telfer points out, he has seen gold reach unexpected heights and also distressing lows, but in the end, gold is a valued commodity that people will always want. Telfer also adds that in the days immediately following the Brexit vote, gold stocks were up.
“It’s a trend we see: when markets get volatile, investors congregate to assets that hold value over the long haul,” Ian Telfer adds. “And gold stocks have always been one of those rainy day stocks.”
To add to Telfer’s point, in the days following Britain’s controversial vote to part ways with the European Union, there was a gold rush of sorts, as investors clamored to purchase stock in the precious metal.
“The speed at which people are purchasing gold is unprecedented,” said Joshua Saul, CEO of The Pure Gold Company. “We are seeing people convert as much as 40 to 50 percent of their net worth into physical gold, (compared to) 5 to 10 percent in the past.”
While gold’s performance so far for 2016 has been very promising, the question remains, will it be able to hold on to the ground it’s gained?
Recently, Oversea-Chinese Banking Corp. economist Barnabas Gan, an international authority on precious metals forecasting, called bullion a “superhero” because of its performance so far this year. He also suggests that gold will continue on its projected upswing and may reach the $1,400 mark before year’s end.