Gold prices will continue to rise over the next 1-2 years, despite a short-term decline to below US$1,800 per ounce, spurred by the prospect of continuing quantitative easing (QE) by central banks to revive the global economy, says a local gold seller.
Tipa Nawawattanasub, chief executive of YLG Bullion and Futures, said gold prices will remain in a bullish trend for the next 1-2 years with a chance of hitting $1,900.
The reason underlying the trend is the US and other countries' continuation of QE policies to stimulate the economy, which should cause the US dollar to weaken in the future.
Among the indicators guiding the gold price is the unemployment rate. If the figure is high, the government will implement a monetary policy, or QE, to increase the money supply. But if it is low, interest rates will be raised, resulting in an outflow from gold to other high-risk assets, she said.
In 2011 when QE was implemented, the gold price peaked at $1,920 per ounce before dropping to $1,045 in 2013 when the policy came to an end. The decline happened because of the US's decision to raise interest rates and terminate QE, resulting in an outflow and the price drop, said Ms Tipa.
Even if a Covid-19 vaccine is successfully developed and distributed, it will take 1-2 years for everything to bounce back to pre-Covid levels, driving each country to implement both monetary and fiscal policies to support the economy, she said.
With all these monetary injections, there will be inflows into the gold market, said Ms Tipa.
Although the price was expected to hit $1,900 per ounce this year, the peak of $2,075 this years considerably higher than the opening price of $1,517 at the beginning of the year, an increase of nearly 33%.
"The gold price will not continue to fall. The support level for a decline is $1,600. The metal saw the return of buyers when the price hit $1,764 per ounce, driving the price to above $1,800," she said.
Even in the worst-case scenario, the price will not drop below $1,000 per ounce as the average mining cost is equal or higher than the price.