Gold Price Of $1,400 Is Just The Start – VanEck

Although gold prices are down from last week’s two-year high, one investment firm sees $1,400 an ounce as just the start as the market remains in a new bull uptrend.

In a report released Tuesday, Joe Foster, gold strategist at VanEck, said that the firm is expecting gold prices to reach $1,400 an ounce in the second half of the year, adding “and we do not believe it will end there.”

Tuesday, August gold futures have seen renewed selling pressure with prices last trading at $1,336.50 an ounce, down almost 1.5% on the day.

What is the driving the next leg of the renewed secular bull market is the fact that investors are being more proactive, he said. He added that inflows into gold-backed exchange-traded products are at their highest level since 2009, when investors sought out safe-haven assets during the sub-prime credit crisis.

“Many are seeing the looming potential for another financial crisis and making a strategic allocation to bullion as a hedge against systemic risk,” he said.

Foster sees several factors in the global economy that will continue to support gold prices in the long term, including continued loosed monetary policy and low bond yields. Quoting the latest report from ratings agency Fitch, he noted that $11 trillion in sovereign debt is offering negative yields.

“Bonds no longer provide safe and steady returns. Investors may seek alternatives to help preserve their wealth,” he said.

Foster also said that weak global growth and volatile currency markets will make gold an attractive investment.

“No government wants a strong currency and Brexit has caused unwanted volatility that may bring destabilizing intervention,” he said.

Turning to the U.S., Foster said that the 2016 presidential election also promises to be positive for the yellow metal, no matter what side wins the race.

“At this time, there seems, in our view, as if there are no good outcomes in the upcoming election. A Clinton victory is likely to bring a continuation of Obama policies that have resulted in a weak economy, rising debt, weak productivity, lack of business formation, and divisive politics. A Trump victory brings uncertainty and the potential for destabilizing policies if his rhetoric on trade, immigration, and debt service are pursued,” he said in his report.

Foster also sees potential for the precious-metals mining sector, which is up more than 100% since the start of the year. He added that if gold hits $1,582 by the end of the year, a 20% rally from current levels, the mining sector could see further gains of almost 50%.