We’re Mere Months Away From $2,000 Gold, $31 Silver

CIBC: Gold is still going towards $2,000 and silver to $31

Bullion.Directory precious metals analysis 29 June, 2021
By Peter Reagan
Financial Market Strategist at Birch Gold Group

While the bank downgraded their average 2021 forecast for gold to $1,925, they expect the metal to average $2,100 in 2022.

Likewise, CIBC’s analysts downgraded their average silver forecast for 2021 to $28 from $29, but said that the metal will nonetheless head onwards to $31 next year. Interestingly, the analysts emphasized that physical precious metals will dominate demand:

We expect demand for physical gold and silver will remain elevated, not only from traditional investors but also from a wider array of investors seeking a safe-haven option to hedge against market volatility.

Regarding the recent fall in prices, CIBC’s analysts explored the specific causes and concluded prices aren’t likely to stay suppressed for much longer. The Federal Reserve clearly wants to ruffle its feathers and assume a hawkish stance to subdue inflationary threats.

Frankly, the Fed’s options are limited. Money printing has slowed in recent months. However, President Biden’s $6 trillion spending plan would place the annual deficit at more than $1.3 trillion over the next decade.

In general, CIBC fully expects the overall environment of monetary stimulus and loose-money policies will last for a good, long while.

Furthermore, CIBC sees “real interest rates” (Treasury rates minus inflation) as an even bigger driver for gold. When real rates are negative, bond buyers lose money even after their bond matures. The analysts noted that gold has historically posted great performances regardless of headline interest rates, so long as real (inflation-adjusted) rates remain low.

At the moment, the five-year real interest rate sits at -1.54% compared to an all-time low of -1.86% in May 2021. That is low.

The general consensus is, real interest rates aren’t likely to budge regardless of the Fed’s actions.

The bank is also highly bullish in silver, stating that while everyone cites silver’s rising industrial component (for solar and green energy applications), investment demand will significantly contribute to price rises over the next two years.

This article was originally published here

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