Gold price is little changed today as the terrific rally experienced in the past few days took a breather. The metal is trading at $1,807, which is a few points below last week’s high of $1,817. Gold is the only metal that has paused. Silver price is up by more than 1% while copper is down by more than 0.10%. At the same time, some analysts now believe that the price of gold could be headed towards $5,000 per ounce.
Gold price heading towards $5,000
A few months ago, we wrote that analysts at Bank of America had upgraded their target for gold to $3,000. And a few weeks ago, we wrote that Goldman Sachs had upgraded its target to $2,500. Also, our technical analysis showed that the metal was aiming for $2,000 in the near term. Now, these investment banks have been joined by a hedge fund that has gained 47% this year.
According to Bloomberg, analysts at Quadriga Igneo are convinced that gold price will rise to between $3,000 and $5,000 in the next decade. Quadriga Ineo has more than $450 million in assets under management. Most of these funds are invested in gold and other precious metals. Others are invested in treasuries and options.
In the statement, the chief investment officer said that the unprecedented stimulus packages being implemented by central banks today will lead to bubbles and addiction to corporate debt. This means that interest rate hikes will be impossible without an economic crash. Also, he believes that inflation will remain high and gold tends to be a hedge against inflation.
However, recent data has shown that consumer prices are relatively cheap. For example, data by BLS showed that inflation rose to 0.6% which is way below the Fed’s target of 2.0%. Earlier today, inflation numbers from the UK also showed that prices was mild. In the statement to Bloomberg, he said:
“What you’re going to see in the next decade is this desperate effort, which is already very obvious, where banks and government just print money and borrow, and bail everyone out, whatever it takes.”
Meanwhile, the rising number of coronavirus cases in the United States means that the Fed could be pushed to implement negative interest rates. Alternatively, the Fed could be forced to implement more unconventional monetary policies.
Gold price technical outlook
Gold price is trading at 1805. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. Also, it seems to have found a top and has also formed a bullish pennant pattern. This means that there is some indecision about whether the XAUUSD will continue rising.
Therefore, I expect that the price will rise because the pennant is usually a continuation pattern. If it does, it is likely to continue rising as bulls aim for the next support at $1850.
On the flip side, a move below the lower side of the pennant will invalidate this prediction of gold price. It will see the price moving lower as bears attempt to move below $1,800.