Gold to $2,500: Two ETF analysts break down Citi’s bullish call for 2021
Gold’s 2021 prospects look bright.
Citigroup in recent weeks came out with a $2,500 price target on the yellow metal for 2021, comparing its mosaic of catalysts to that of gold’s 1970-1980 bull market.
Those catalysts are “very much in place,” GraniteShares founder and CEO Will Rhind told CNBC’s “ETF Edge” on Monday.
“The stimulus … would be probably the most obvious one, the one that’s certainly driven gold prices for the majority of this year in 2020,” he said.
On top of that, the weaker dollar, rising inflation expectations, falling real yields and ongoing market volatility should all continue to boost prices, said Rhind, whose firm runs the GraniteShares Gold Trust (BAR).
“The conditions that drove gold to an all-time high this year are very much still in place. I think it’s just natural that once you get to an all-time high in an asset class, there’s some consolidation afterwards and that’s what we’re seeing right now in terms of the price,” he said. “But the fundamental conditions are still here and I believe that they will be here for the next 12-15 months minimum as well.”
ETF Trends’ Dave Nadig — “not a big gold bug,” by his own proclamation — flagged several more bullish catalysts.
“I’m the first one to point out that gold is a nonproducing asset. It’s a psychological commodity, meaning it’s only worth what somebody else will pay for it,” Nadig, chief investment officer and director of research at ETF Trends and ETF Database, said in the same “ETF Edge” interview.
“That being said, it’s hard to argue with thousands of years of history of folks looking to gold as a store of value in times of crisis, and I don’t know what we’re in if it’s not a time of crisis,” he said.
The Fed and the promise of a vaccine aren’t enough to protect investors from a ‘reckoning,’ top economist warns
Investors had plenty to be thankful for last week, considering how the stock market behaved in the face of surging COVID-19 cases and some potentially troubling signs on the economic front.
By the time Friday’s closing bell marked the end of the holiday-shortened stretch, the Dow Jones Industrial Average DJIA, +0.12% had racked up a stellar gain of 2.2% to close at 29,910.37 after having closed above 30,000 earlier in the week for the first time ever. The S&P 500 SPX, +0.24% and Nasdaq Composite COMP, +0.92% also banged out record highs.
Mohamed El-Erian, president of Queens’ College University of Cambridge and economic adviser to Allianz, isn’t so sure the bull run will last.
“I can see why the market has embraced the better destination and has embraced this improvement in the journey,” he told Yahoo Finance in an interview on Friday. “But we still have quite a bumpy journey left. And I suspect we’re going to see unfortunately some companies come under a lot of pressure in the next few months.”
El-Erian acknowledged that investors are taking on risk, and that there are valid reasons to support such a move, specifically the Federal Reserve’s clear intention of remaining a backstop for the market as well as the promise of a vaccine finally putting the end of the pandemic in view.
“As long as we believe that there’s a vaccine, and as long as we believe the central banks are going to minimize all the damage to the markets, not to the economy, to the markets up to that point, what you will get is people stretching for more returns,” he explained.
But, he warned, there’s one potential problem those two factors can’t fix: bankruptcies, which he says are on the way. “I tell investors, please be careful,” he said. “Do another granular analysis because as you stretch for more yield, you take on a lot more default and bankruptcy risk. And that is not something that central banks can save you from.”
El-Erian also addressed the decoupling of the bullish run in the stock market from what’s happening in the real world. “The gap between Main Street and Wall Street is very, very large, and it is increasing,” he said. “And that’s not healthy for society, and it’s not healthy for the markets longer term. You should worry about a reckoning longer term, especially if the economy doesn’t improve quickly and validate what are very high asset crisis.”
CNN Business/Paul R. LaMonica
Another 778,000 Americans filed first-time unemployment claims last week
The recovery in the American job market is still painfully slow. Another 778,000 people filed for first-time unemployment benefits last week on a seasonally adjusted basis.
That was more than the 735,000 initial jobless claims that economists were expecting, and it’s also higher than last week’s revised number of 748,000. It’s the second straight week that first-time claims rose.
This is the first time that jobless claims were up for two consecutive weeks since late July. And the 778,000 figure was the highest level in five weeks.
The latest unemployment benefits figures were released by the Labor Department on Wednesday, a day earlier than usual because of the Thanksgiving holiday.
The report also showed that continued jobless claims, which include people who have applied for benefits for at least two weeks in a row, was 6.1 million on a seasonally adjusted basis. That was down from the previous week.
And 4.5 million more people had received Pandemic Emergency Unemployment Compensation benefits from the government as of the week of November 7. There is a two-week lag with PEUC data.
Overall, more than 20.4 million Americans were still receiving some form of unemployment benefits as of November 7. That’s an increase of more than 135,000 from a week ago.
The bleak jobs data is yet another sign of the disconnect between the stock market and broader economy.
The Dow just a hit a new all-time high above 30,000 Tuesday but many average Americans are still struggling — especially that government stimulus checks have stopped coming and Covid-19 cases are on the rise again.