PIMCO: The rally of gold is not yet complete
PIMCO’s commodity portfolio manager said the rally is not yet over and the precious metal is still cheap
Stating that the current levels in Gold are not expensive, Pacific Investment Management Co. stated that the rally in precious metal is not yet complete and it has room to increase earnings with real interest rates remaining low.
“Despite the recent rise in prices, we think gold is still attractively valuable, even cheap in the context of historically low real rates,” said Nicholas Johnson, PIMCO’s commodity portfolio manager.
Gold broke a record earlier this month, exceeding $ 2,000, as investors turned to safe assets due to the coronavirus pandemic. While central banks announced unprecedented monetary incentives, the real interest rate of 10-year Treasury bonds in the US fell well below zero. Thus, the appeal of non-interest-paying gold increased and there were fund inflows to gold-backed exchange-traded funds (ETF).
Johnson wrote in his blog post: “Our baseline scenario will remain relatively within the band. With this outlook and momentum, our view that the interest in gold will push the real interest-adjusted gold price upwards shows that gold still has upward potential.” said.
An ounce of gold traded in the spot market was traded at $ 1,930 on Tuesday. Gold has gained around 27 percent this year. Johnson did not give a clear price target. However, other institutions expecting an increase in recent weeks have stated their targets. For example, Goldman Sachs Group Inc. expects gold to rise to $ 2,300 an ounce.