Where Is the Gold Price Heading Next?

The gold price has risen significantly in recent times. Can it go even higher?

A recurring question is what to expect next and whether the price of gold can continue to rise from here. It has already come a long way — is there still room for further upside?

IN OUR VIEW, THE FUNDAMENTAL PICTURE HAS NOT CHANGED:

We believe that gold's role will appreciate dramatically in the near term, though this may not be immediately reflected in the price.

During the 2008–2009 crisis, gold first fell 34% before rising 280%. As long as initial recessionary fears dominate over fears of hyperinflation, gold struggles to gain traction. However, there is also a scenario in which the change occurs suddenly and the gold price "jumps" — rising 20–30% in 1–2 days, or even overnight — if a sustained global physical gold shortage develops.

• All the conditions are in place for gold's medium-term outlook to offer extraordinary returns; however, this will not genuinely be a profit generated by gold itself, but will rather derive from the depreciation of other assets — primarily currencies — relative to gold. Unfortunately, the forint may become particularly vulnerable in the near term, especially if the summer tourist season cannot be revived. It is worth consulting currency exchange operators to hear their views on this.

• Even greater a risk to future inflation, in our view, is the institution of unlimited fiscal stimulus and in particular helicopter money. An article that seemed laughable just a few years ago has now become mainstream, and hundreds of millions of people may already be waiting for free dollars or yen to arrive in their accounts. It requires only clear-headed thinking to consider what the consequences may be for the dollar (and other currencies). In summary: the pandemic is not the primary risk to the real value of our savings — the main risk is the unlimited, global spending triggered by the response to it.

We gold dealers have, for a brief period over recent weeks, found ourselves at the centre of the financial market. As a personal experience, we witnessed at first hand what it is like when paper money flows in without pause and the supply of gold available for sale suddenly runs out.