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EXANTE: Gold price could double in next 3 years

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Global Mining Review,

According to EXANTE's analysis, Gold can not only get back to its historic highs in November, but also rich US$2200 by the end of the year. At that, it will not be a surprise if this price will double in the next 3 years.

It has become the best investment of the year. Central banks’ inflow of liquidity into the financial markets has made the metal fundamentally attractive. It had been growing until August, then experienced a significant correction in September (-4%) and is now poised to grow again. The correction seems rather technical, encouraged by the need to fix the revenues. Now, the dynamic resembles what was seen during the global financial crisis. Back then, gold was going down on the back of market fears, yet in 3 years after 2008 it tripled in price, bouncing from the year’s lows. Now, the same preconditions and upward trends are in place.

The US dollar is what the investors resort to when there is a market collapse. That said, it has recently witnessed that the US monetary authorities always ‘come to the rescue’. Not without a glitch, but the economy will continue to recover, boosting the demand for primary goods and gold as a kind of inflation protection.

The Russian rouble and the Turkish lira, which both have had a rough ride recently, made significant gains on 30 September 2020. There is no reason, according to EXANTE, to believe that this is somehow related to the ongoing Armenian-Azeri conflict. The rouble received support from the publication of a government directive instructing at least three major Russian companies (Gazprom, Rosneft and Alrosa) to keep their FX assets at or below a certain historical level. This means that these companies have little room for buying FX and could even be forced to sell some of their FX holdings. In Turkey, the markets reacted favourably to the news that the government has cut withholding tax on new TRY deposit accounts.

Other emerging market currencies, such as the Mexican peso and the South African rand, also posted substantial gains on 30 September 2020. This could be a reflection of the markets expecting further US fiscal stimulus and perhaps also due to the possibility of Donald Trump vacating the White House soon.

The Great British pound enjoyed another rally on the news that the UK negotiating team has achieved a compromise on fishing rights with its EU counterparts. The UK offered a 3-year transition period for any changes in fishing limits for EU fishing fleets. The news, however, could be something of a red herring given that the EU and UK delegations still need to achieve an agreement on state aid, which is the key sticking point.

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