In the precious metal refinery Valcambi SA in Lugano, Switzerland, on April 24, 2018, there is a mark of 999.9 on marked 1 kilogram gold bars.
Stefan Wermuth | Bloomberg | Getty Images
Gold is still a “relatively cheap” investment and could continue to rise even if it soon tops $ 1,900 an ounce, a strategist said Thursday.
Richard Kelly, director of global strategy for TD Securities, told CNBC’s Street Signs Europe that “gold has seen a phenomenal rise over the past year and when that reversed I think it has put some investors off.”
The spot gold price hit an all-time high of $ 2,063 per troy ounce in August last year. However, refinitive data shows it is now at $ 1,877.
Gold was under pressure in the first few months of 2021. It did so amid a sharp spike in US Treasury bond yields as traders bet that inflation would cause the Federal Reserve to raise interest rates and taper its accommodative monetary policy. Gold has traditionally been viewed as a hedge against inflation, but any attempt by central banks to contain inflation is usually bad for gold bars.
Kelly also noted gold’s relationship to the US dollar. Since the price of gold is usually quoted in US dollars, a fall in the greenback can lead to higher gold prices.
Kelly believes the dollar – and even other major currencies like the euro – now looked “rich” in relative terms, suggesting a possible decline in the price of gold.
“Gold is relatively cheap, so if you think about that positioning, gold is definitely one that has some catching up to do,” Kelly told CNBC.
Kelly added that even if gold were to hit $ 1,900 “or even above, this is still an area that, given what we see in policy rates, given what we see in inflation dynamics and overall under-positioning in,” Has room for maneuver On this side, this is certainly catching up business that can have more legs.
In a notice to clients this week, JPMorgan said institutional investors were dropping Bitcoin in favor of gold. The cryptocurrency had started to make a name for itself as a kind of “digital gold” that offers protection against inflation.
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