The Price of Gold will Rise Regardless of the Election Result

According to analysts at Haywood Securities, there are many arguments as to who will be the next President of the United States. One thing most seem to agree on is that the price of gold will be higher no matter who is in office.

Gold has been on the rise in 2020. It has drawn widespread attention as it rallied to a record $2,000 per ounce earlier this year. Its price has since fallen below $1,900. However, it has remained at historically high levels amid low to negative interest rates and economic uncertainty related to the ongoing Covid-19 pandemic.

Haywood analysts pointed to a fragile US economy and an ongoing Fed money printing to raise inflation expectations and put pressure on the US dollar. With that in mind, they suggested that investors buy falls in both gold and silver stocks.

UBS analysts took a similar view in a recent note. They described their thoughts on the factors supporting gold and how it may trade in 2021. One clear factor has been investment demand, with cash flow in both bars and currencies, as well as exchange-traded funds or ETFs. 

According to analysts, some of the common suspects behind the rise in gold are falling US interest rates, market volatility and a weak dollar. Looking at the ETF investment figures, UBS said that North American investors had dominated demand. Thus, accounting for 65% of inflows in the first half of the year. Still, since the first half of 2020, purchases have slowed. So for gold to rise from current levels, it needs more investment-related demand. UBS analysts see more inflows if the pandemic causes more economic uncertainty, and the United States stimulates the economy through a significant fiscal package. It could increase inflation while the Federal Reserve keeps rates low.

Gold price is expected to increase to $2,000

Making a gold price projection, Bloomberg analyst Mike McGlone said he sees gold breaking out of its recent trading range at around $1,900 an ounce. The analyst noted that he expected the precious metal price to rise to about $2,000 an ounce.

Meanwhile, the rise of gold in 2020 has helped support the exploration sector. Additionally, it is also expected to boost mining equities as third-quarter results come in.

S&P Global Market Intelligence analyst, Christopher Galbraith, noted that exploration budgets have fallen for most metals. However, gold exploration budgets have been relatively stable, with a 1% year-on-year increase to 4.34 billion dollars expected in 2020. Gold exploration took a modest profit despite pandemic-related lockdowns that slowed activity earlier in the year.