26.08.202011:48 Forex Analysis & Reviews: Where will the gold go next?

The price of gold endured the pressure during the last month of summer and so, the supporters and opposers of gold's further development are doing the best they can to protect their positions. With gold benefitting from this battle, its price can grow to great values.

Christopher Wood, an expert on the precious metals market, is a supporter of gold's active growth. It should be noted that he predicted a rise in the price of gold to $4, 200 at the beginning of this year, and these calculations were not only confirmed, but also strengthened. According to the specialist, the gold can increase up to 180%, that is, to $ 5500 per ounce respectively. The current forecast is based on mathematical models that use the level of per capita income in the United States, while the calculation used by C. Wood is based on the previous maximum price of gold, recorded in 1980.

Against this background, many market participants are convinced by his calculations. According to the analyst, the price of gold in the 1980s of the twentieth century was 9.9% of the disposable income per capita in the US, which was equivalent to $ 8,547. This year, the price of gold averaged $1, 952 per ounce, or 3.6% of per capita income, which is $ 53,747. According to C. Wood, gold will have to rise to $ 5345 per ounce so that it can reach the 9.9% mark again. He summed up that this is a reasonable target and a fair price for gold during a bullish market.

In connection to this, currency strategists of Pacific Investment Management Co. (PIMCO) agrees with C. Wood's opinion. They also emphasize the importance of the potential of the precious metal, considering that its growth is not complete. Moreover, PIMCO is confident that gold will gain impulse in the near future, surprising the market with another round of prices. Here, we can consider the very low real interest rates as one of the drivers of further appreciation of gold. The bank is confident that they will remain at current levels in the near future, contributing to the strengthening of its positions.

The price of gold is currently experiencing a significant volatility. Its recent rise to $ 2,000 per ounce was followed by a deafening decline. However, experts urge not to worry ahead of time, since it is too early to talk about a change in the trend. According to them, gold has not yet entered a downward spiral, but only slightly slowed down in growth. On Wednesday, August 26, it traded in the range of $ 1917– $ 1918, trying to consolidate its positions. These attempts were not always successful, but they showed the course of a potential upward movement of gold.

In turn, a sharp weakening in demand, mainly in developing countries, will not be good for the gold which can cause it to decline. Nevertheless, PIMCO is sure that even low demand will not prevent gold from growing in the medium and long-term. The bank believes that the indicated metal is very cheap and it will rise eventually.