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Massive gold price revisions are hitting the market this week as analysts estimate the impact of the COVID-19 crisis, with one investment bank upping its Q3 and Q4 gold price forecasts to an impressive $2,500 an ounce.
Citing unprecedented fiscal and monetary policy stimulus, B. Riley FBR analysts said on Tuesday that they expect gold to surge to $2,500 an ounce in Q3 and continue to trade at those levels in Q4.
“It has not been our practice to forecast gold price,” wrote B. Riley FBR’s analysts. “[But] due to our conviction in rising gold prices, we are meaningfully raising our gold price deck … to $2,500/oz in 3Q20 … and we feel compelled to align our 12-month price targets to this view.”
The main driver will not be a potentially deep recession or another major drop in equity markets, but extremely low rates along with “unprecedented fiscal and monetary stimulus,” the analysts said.
“Regardless of how much longer recession conditions will continue and how much further general equity markets might retreat, extreme monetary and fiscal stimulus policies being enacted on a global basis will have repercussions,” B. Riley FBR’s note stated. “These repercussions will likely parallel 2009-2011, and drive gold price to new highs.”
Gold miners will greatly benefit from this surge in prices once the economy begins to return to normal more or less, the analysts added.
“We believe the current macro environment has been primed to drive gold prices to the $2,500/oz level. During such a gold price ascent, gold will be the best performing asset class, and gold related equities will be the best performing equity sector,” they wrote.
The investment bank advises its clients to “overweight gold and gold-related equities, and hold a market cap weighted portfolio of our favorite names: NEM, RGLD, PVG, SSRM, and CDE.”
“We also recommend our favorite pre-producers (GSV, SA, SILV), which we view as most likely to be caught up in an M&A wave associated with rising gold prices,” the analysts added.
By Anna Golubova
For Kitco News
