KUALA LUMPUR: Can gold price rise again, and again?
Economists believe gold can extend its record-breaking run to hit a whopping US$5,000 an ounce by end of next year.
Gold prices have been on the rise and, for the first time, breached the US$2,000 an ounce mark a few days ago.
At time of writing, the price stands at US$2,060 an ounce yesterday's evening.
Juwai IQI chief economist Shan Saeed said gold prices would likely be trading at between US$3,000 and US$5,000 an ounce by December 2021.
"There are two factors that will determine or will make an impact on gold prices - central banks' manipulation and profit taking.
"Gold will continue to be on the upsurge as major investors are increasing their investment portfolio, which in turn will support gold prices in the long run," Shan told the New Straits Times (NST).
He expects the US dollar and gold standard to run parallel with each other in the next two to three years.
Shan said this was a third bull-run in gold as investors would park more funds in precious metal (gold and silver) as these were the tangible asset with zero counter-party risk.
"These metals have the same value throughout the world, while the currency market can fluctuate as its valuation varies," he said, adding that US dollar was depreciating about five per cent of its value against major currencies in July.
OANDA senior market analyst for Asia Pacific Jeffrey Halley said the underpinnings of the gold rally remain in place, and would be so for years to come.
"Any move down, no matter how violent, is likely to be merely a correction within a longer-term uptrend.
"Gold cold retreat in a sudden bout of strength in the US dollar. It could also violently fall if stock markets were also to do so. Then, as in March, gold will be sold for cash to cover losses in equities," he told the NST.
Halley said no markets moves in a linear way constantly upwards forever, citing that they would always have corrections along the way and some quite deep potentially.
"Prices do not move in an exactly correlates manner with each other. A weaker dollar is only one supportive factor in the bullish case for gold," he added.
Halley said factors supporting gold remain strong.
"A rise in interest rates makes gold less appealing as it pays no yield. A rising dollar, yes, as gold is priced in dollar."
AxiCorp chief global market strategist Stephen Innes said markets were worried about a second Covid-19 surge into winter (northern hemisphere). Hence, the associated rise in volatility will favour gold as a defensive strategy.
"The economic damage is done, and even a vaccine is not going to bring back US$80 billion in global gross domestic product (GDP) that went up in smoke.
"The only real cure to claw back some of that lost GDP is low global interest rates for as far as the eyes can see and redoubled amounts of government stimuli, which is highly favourable for gold," he said.
From a hedging perspective, he said gold investors cared about the level of inflation, not necessarily the changes in inflation.
Innes said the economy would lift off, but traders were now hedging against that anticipated surge now since there was no opportunity cost to hold gold.
The rally could keep on keeping on until the US' Federal Reserve has no option but to raise rates to defend inflation, but the market suspects that would be many years away, he added.
"In the meantime, those nasty US dealing deficits will weigh heavily on the US dollar outlook, which will create even more demand for gold," he said.