Gold continues to play its historic role as a safe haven in times of uncertainty. Hovering around US $ 2,000 an ounce in the past few days, investors who ignored this role at the start of the crisis may now be wondering if they missed the boat.
And yet, despite its value rising by about 30% this year, the route to the Klondike still looks promising, especially with the sudden drop in gold prices on Tuesday.
The fundamental factors that propel its price are likely to persist or change: anemic interest rates, inflation, the depreciation of the US dollar and market volatility.
The economist and chief strategist of the National Bank, Stéfane Marion, relies mainly on the first of these four factors to explain what “dope»The value of the precious metal now. This is because the intervention of central banks to support the economy by massively buying government bonds has led to a significant drop in interest rates.
Investors even find themselves faced with negative bond yields taking inflation into account and thus turn to a safe haven, or more attractive, in the circumstances … gold.
«Gold does not pay an interest rate, recalls the economist. […] In general, a negative interest rate environment is very favorable for the price of bullion.»
A certain enthusiasm …
Since central banks are showing an intention to keep interest rates below inflation for a good period of time, if not several years, Mr. Marion still sees upside potential combined with a “limited drop».
At over US $ 2,000 an ounce, the yellow metal would be overvalued by plus or minus $ 200, according to the financial institution.
Investors saw it as an opportunity to make a profit on Tuesday. The sudden correction of nearly 6% would gradually bring gold back to a fairer price, and “could justify a better entry point“. Its price is also slightly on the rise Wednesday.
In the coming months, many analysts predict that the material will retain its strength and will jump several hundred dollars. At the end of April, the Bank of America even expected an ounce at US $ 3,000 by the summer of 2021.
… but not for all
This gold rush is not for everyone. Talk to Eddy Chandonnet, portfolio manager and partner at Medici: “buy a metal with the objective of this metal increasing in value over time, it is not an investment that we find interesting».
The Saint-Bruno-de-Montarville firm adopts a vision similar to that of investor Warren Buffet, who has never hidden his aversion to gold. “You buy a metal, store it somewhere and wait for its value to appreciate, deplores Mr. Chandonnet. You will not receive dividends and the profits generated will not create value [pour les actionnaires].»
Some people see gold as an object of speculation rather than investment, but many others, on the other hand, have once again confirmed it as a protection par excellence in times of crisis.