After a short pause for breath, the price of gold is now rising again and is currently only about USD 100 below its all-time high of 2011. In our view, it will be possible to exceed this level in the current rally, but not necessarily at the first attempt. The current reluctance of central banks to buy gold and the lower demand from jewellers argues for a slight price decline, at least in the short term.
However, investment demand is currently very high. Fears of a second corona wave are growing. These uncertainties support gold. However, a second wave, which we do not expect, could also cause investors to panic again. In such a scenario, gold would also lose value. We maintain that gold profits from uncertainty, but not from panic.
In the current environment, gold and the global stock markets are rising in step. But this is actually not unusual and was also observed in this form after the financial crisis. The measures taken by central banks around the world and the huge fiscal packages of individual governments are the main fuel for the stock market rally that is taking place. As these measures are not entirely without long-term risks, some investors are currently choosing gold as a hedging vehicle. Figuratively speaking, gold acts as an ejector seat in the rising jet called the stock market.
As mentioned earlier, we do not expect gold to crack its all-time high on the first attempt, but looking ahead over the next 12 months, it is quite possible.