In a report released late last month, Wells Fargo raised its year-end price target for gold to between $1,800 and $1,900 an ounce, an increase from its previous forecast of $1,650 and $1,750 an ounce.
Although the bank is bullish on gold, John LaForge, head of real asset strategy for Wells Fargo and author of the latest report, said that he doesn ’t see gold prices pushing to $2,000 this year.
“Breaking out to new all-time highs is a serious thing, no matter the asset. The $1,900 level could very well act as a resistance point for technical traders. The point is that it may take a few tries before gold breaks out to new highs if it does at all and 2020 is short on time,” he said in his report.
This week gold prices pushed to within striking distance of $1,800 but the market has lost some momentum as technical selling has picked up. Analysts are now looking to see if $1,700 an ounce will hold as support for the precious metal.
Although Wells Fargo has capped its bullishness for the year, LaForge noted that there are very real reasons for gold prices to continue to push higher through 2020, including further economic uncertainty, and growing inflation threats.
In the last three months central banks and governments have flooded financial markets with liquidity in an attempt to protect the global economy, devastated by the COVID-19 pandemic.
“Since 2016 investors increasingly have used gold to hedge against the unknown impacts of sinking and persistently low, long-term interest rates. Recent global injection of month by central banks, in reaction to the economic effects of the coronavirus, have only added fuel to this hedge,” he said.
“We expect additional QE in the U.S. and global. Investors are also using gold as a substitute for long-term bonds as a safety asset. With no particular ties to a government or other bond issuer, gold looks attractive to safe seeking long-term investors,” he added in the report.