There’s an increasingly compelling case that the gold market we’re seeing right now is in the very early stages of a break-out bull market that will rival the performance gold saw from 2008 to 2011. That bull market saw gold rise from under $1,000 to nearly $2,000 by its peak. And with gold starting its bull market run at nearly $1,300 this year, by the time this market reaches its peak we should see gold over $2,000, with $2,500 not entirely out of the question.
Even mainstream analysts are seeing the similarities between gold’s performance in 2008 and its performance in 2019. Bank of America Merrill Lynch’s analysts have highlighted many of the similarities between gold’s performance today and its performance a decade ago, stating that they expect it to be the best-performing investment asset of 2020.
Much of gold’s bull run a decade ago was the result of central bank response to the financial crisis, pushing interest rates nearly to zero and flooding the financial system with trillions of dollars of newly created money. That left gold as one of the few viable investment assets, and naturally investors flocked to it.
BoAML analysts noted the fact that gold’s price increased as real interest rates decreased. With the Federal Reserve set to push interest rates further down in the coming months, that should provide a meaningful boost to the gold price. In fact, it was largely the Federal Reserve’s decision to slow down its monetary easing that put the brakes on gold’s phenomenal run.
This time around the Fed likely won’t be going straight to quantitative easing, but its monetary easing through lowering interest rates will still provide a boost to the gold price. With stocks plateauing and giving investors no real opportunity to make gains, and bond markets showing signs of major turmoil, gold will once again be the natural investment choice for those looking to safeguard their assets and maintain their investment gains through what looks to be another bout of economic turmoil.