(Kitco News) – In a world awash in negative bond, gold will continue to shine as an alternative asset and could attract more attention from major central banks in 2020, according to one market analyst.
In a telephone interview with Kitco News, Ole Hansen said that the world’s burgeoning debt is becoming a growing concern among Western central banks, and gold could be the answer to create some stability.
“We have seen some pretty bold comments on gold from European central banks, and it might not take much for them to become gold buyers,” said Hansen. “Many see gold as the anchor of stability in a world of financial uncertainty.”
Some of the central bank comments that have made headlines recently is a statement by President of the German Bundesbank Jens Weidman, calling gold the bedrock of stability for the international monetary system. In October, the Dutch central bank said in a report that gold bolsters confidence in a central bank’s balance sheet and provides a sense of security.
But it more than just words, in 2018 Poland was the first European nation to buy gold in 20 years. It bought 16.4 tons that year. The central bank followed up those purchases, increasing its reserves by more than 100 tons in 2019.
Hansen said that Poland’s gold purchase could be the start of a new European trend.
“Some countries are really struggling with negative interest rates. It’s really destroying wealth,” he said. “Whether you are a central bank or a private investor, gold is an attractive asset in a world of negative yielding interest rates.”
But it’s not just continued central bank demand that will drive gold’s uptrend next year. Hansen said that he remains long-term bullish on gold as prices hold above $1,380 an ounce.
Although gold is stuck in a range between support at $1,450 and resistance at $1,500, Hansen said that he still sees more upside potential in the yellow metal next year. The outlook comes as the gold market tries to attract some momentum after recently holding critical support above $1,450 an ounce. February gold futures last traded at $1,470.40 an ounce, up 0.66% on the day.
Renewed recession fears in the U.S. could be the spark that drives gold prices higher next year.
“We still believe that the low point in the U.S. economy lies further ahead,” he said. “The Federal Reserve is way too relaxed on monetary policy and a potential economic slowdown.”
Hansen said that new recession threats will force the U.S. central bank to lower interest rates further, which would weaken the U.S. dollar, and propel the yellow metal.