The gold market might keep struggling in the short-term as investors react to rising interest. However, according to one strategist, Gold will remain an important diversifier through 2021 and going forward.
“While the economy is expecting a recovery from the pandemic, it doesn’t surprise us that bond yields are increasing sharply,” said Kristina Hooper, Invesco’s chief investment strategist. She went on to say that the 10-year yield has potential to go to 2% in the current climate.
“We could hit 2%. But will also get more positive earnings and other improved economic data,” she said. “So far, nothing we have witnessed has been chaotic. Increasing rates is what we expect during an improving economic climate.”
Although the Fed has been hush-hush about the possible launch of a yield curve control program, Hooper stated that if increasing bond yields leads to stricter fiscal circumstances or disorder, then the central bank will be fast to act.
Although better economic conditions will weigh on Gold, Hooper predicted modest upward movement for the precious metal as growth pushes inflation higher. She sees gold reaching $1,850 per ounce by year-end.
“I am not worried about inflation, but the rest of the world is. We are seeing a lot of anxiety about inflation. This will drive investors to gold,” she said.
Along with heightening price pressures, Hooper said gold remains a top safe-haven as global tensions continue to rise.
“Gold has historically been a safety hedge against political risks,” Hooper said. “The current geopolitical situation might create some upward pressure for gold through this year.”
Comparing diversification against record valuations, Hooper stated that gold is still the best hedge insurance, even if more people are turning to bitcoin.
Author: Steven Sinclaire