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Gold's Allure Dims Slightly as Investment Option

Investment demand is expected to drop.

Kristoffer Inton: 2019 saw the resurgence of gold investment demand, leading prices to spike nearly 20% to more than $1,500 per ounce. Unlike previous rallies that we argued were fleeting, today's environment is different. With the Federal Open Market Committee cutting the federal-funds rate three times since August 2019, the investment case has strengthened. Amid heightened investment demand, we forecast a gold price of $1,500 per ounce for 2020.

However, when it comes to gold as an investment, today's demand is tomorrow's supply. Investment-driven buyers can quickly sell when real interest rates rise. In fact, ETF-held gold has reached record levels and now sits equivalent to roughly a year's worth of mine production. We forecast investment demand will eventually begin to unwind, which would weigh significantly on prices.