By Frank Holmes
It’s been a stellar six months for gold investors. The yellow metal has surged 28 percent year-to-date, its best first half of the year since 1974, and there are signs that the rally is just getting started. That’s the assessment of analysts from UBS and Credit Suisse, who see gold entering a new bull run. According to UBS analyst Joni Teves, gold could climb to $1,400 an ounce in the short term on macroeconomic uncertainty, dovish monetary policy and lower yields.
“These factors,” Teves writes, “justify strategic gold allocations across different types of investors” and should encourage hesitant investors to participate.
Already-low bond yields around the globe have fallen even further in Brexit’s wake, many of them hitting fresh all-time lows, including yields in the U.S., U.K., Germany, France, Australia, Japan and elsewhere. For the first time ever, Switzerland’s entire stock of bond yields has fallen below zero, with the 50-year yield plunging to negative 0.03 percent on July 5.
About $10 trillion worth of global government debt now carry historically low or negative yields, which are “creating negative growth” in the world economy, according to billionaire “bond king” Bill Gross in his recent Investment Outlook.
Anemic yields are also contributing to gold’s attractiveness right now. Since Britain’s June 23 referendum, the precious metal has rallied more than 8 percent, helping it achieve its best first half of the year in more than a generation.
Negative Real Rates Fuel Prices
Joining UBS in forecasting further gains is Credit Suisse, which sees gold reaching $1,500 by as early as the start of next year. As Kitco reports, Credit Suisse analyst Michael Slifirski writes that “the surprise Brexit vote has solidified and intensified macro and political uncertainty and extended the time frame for a negative real rate environment in the U.S. and potentially abroad.”