Can gold recapture its glory from 2020? Some analysts seem to think so, with Wells Fargo setting a lofty price target for the precious metal, which should help boost the VanEck Merk Gold Trust (OUNZ ).
Per a Kitco News report, Wells Fargo is seeing early signs of what could be a stronger rally later in 2021. The catalyst for “this new spark in prices is diminishing supply growth. And it could get gold up to $2,200 an ounce this year, said Wells Fargo’s head of real asset strategy John LaForge.”
“Gold supplies have flipped from excessive to deficient,” LaForge noted in the report. “Such times in the past have sparked some of gold’s strongest price rallies.”
“Supply had become excessive in 2011 because gold prices had surged from $250 to $1900 per ounce, during the decade from 2001 to 2011. Many investors were looking for gold during this decade, and they all seemed to find it,” he added.
OUNZ seeks to provide investors with an opportunity to invest in gold through the shares and delivery of physical gold in exchange for those shares. Summarily, OUNZ offers investors:
- Deliverability: VanEck Merk Gold Trust holds gold bullion in the form of allocated London Bars. It differentiates itself by providing investors with the option to take physical delivery of gold bullion in exchange for their shares.
- Convertibility: For the purpose of facilitating delivery, Merk has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
- Tax Efficiency: Taking delivery of gold is not a taxable event as investors merely take possession of what they already own, the gold.
Gold Supplies Moved from 'Excessive to Deficient'
LaForge noted that in the past few years, gold supplies have moved from “excessive to deficient,” prompting Wells Fargo to cast a positive light on gold prices.
“Such times in the past have sparked some of gold’s strongest price rallies … We believe gold could be on the eve of a new commodity bull super-cycle, which would be only the seventh since the year 1800,” LaForge said. “Gold prices have climbed over 40% since 2018, and we believe that more gains lie ahead.”
In the meantime, interest rates and the greenback will continue to weigh on the precious metal.
“These trends remain largely intact, and we remain gold bulls with a 2021 target range of $2,100 to $2,200,” LaForge said.
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