Gold felt heavy selling on Monday/Tuesday and extended the previous session's sharp intra-day retracement from yearly highs.
As investors continue to feel the effects of global fears of the COVID-19 it has become very apparent that the shiny metal has become a top priority as a safe haven option.
Here are 3 reasons why Gold can continue to go higher:
1. High-Risk Environment - The world is going through extreme uncertainty right now with an outbreak of Coronavirus hitting Europe and still very present in Asia. Gold has been a safe haven for as long as we can remember and as we continue to see fear we will continue to see gold purchases.
2. Global Correction, Lower Interests - Normally when we see a market correction plus low-interest rates we will start to see an increase in cash holders. This is somewhat to true as we see USD gaining strength daily but it is also not wise to hold cash in an environment in which are likely to see more rate cuts. Here's where Gold comes in and investors look to use the low interest capital not to buy equities at an all-time high but to focus on capital preservation.
3. No "Suitable" Safe Haven Alternative - Bitcoin is a very worthy competitor for Gold as the next major safe haven but let's just say it is still not quite ready. Larger investors are not looking to expose themselves to higher risk assets in a high-risk environment. Bitcoin has never participated in any economic recession or major downturn for that it is unlikely for investors to assume it takes the place of a safe haven. This puts all the eyes on Gold which means more buying and higher prices as the investor fears increase.
From what we are seeing in the market Gold is poised for $1700+ and it's not a matter of if, it's a matter of when.
Please refer to your own advisor for financial, legal or personal advice. This opinion is by Connor Benoit Milner.