GMA Viewpoint: Gold Bull Market to Continue

August 31, 2019

Gold may seem vulnerable after its rapid +30% rise since last fall (over +45% since the late-2015 trough), with many indicators suggesting increased investor enthusiasm.¹ However, we think the one- to two-year outlook for gold remains attractive, and expect gold to reach $2000, supported by a weaker dollar and the increasing likelihood of wider budget deficits and looser monetary policy globally.²

Since 2006, gold has slavishly followed the fluctuations of real yields and the U.S. dollar. Gold’s recent rise can almost entirely be attributed to just one factor—the decline in real U.S. yields since November 2018. The U.S. 10-year TIPS (Treasury inflation-protected securities) yield has fallen from the peak of 118 basis points in November to about zero at the end of August 2019. We believe this explained most of the rise in gold prices over this time period, somewhat offset by a mildly stronger U.S. dollar. The fall in TIPS yields has been fairly consistent with the slowdown in global growth during this time.³

Cyril Moulle-Berteaux

Head of Global Multi-Asset Team

Sergei Parmenov

Managing Director

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¹ MSIM Global Multi-Asset Team Analysis, Bloomberg.

² MSIM Global Multi-Asset Team estimates.

³ MSIM Global Multi-Asset Team Analysis, Bloomberg (whole paragraph)

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