In a remarkable interview, released on CNBC and embedded below, JP Morgan admits that gold is looking very attractive, and believes it has entered a new bull market.
Mrs. Marcelli from the Private Bank division within JP Morgan said: “We’re recommending our clients to position for a new and very long bull market for gold. After seeing three back-to-back years of losses, the precious metal has rallied 20 percent in 2016. And that’s just the start of the next leg higher. $1,400 is very much in the cards this year.”
The rationale behind the birth of gold’s new bull market is based on negative interest rate policies from central banks around the world. “Gold will continue to be bought as an alternative currency.” With expectations that investors will seek to hedge against the resulting volatility, gold will remain attractive in a world where bonds and U.S. rates may cease to be the main risk-off asset.
“Gold is a great portfolio hedge in an environment where the world government bonds are yielding at historically low levels,” says JP Morgan’s Marcelli. Central banks may consider diversifying their reserves in order to overcome negative rates on their existing holdings.
The move will come slowly, she remains convinced that the commodity will continue to grind higher — with that key $1,400 level being the first line in the sand within gold’s new bull market.