Gold is at all-time highs. Why it will continue to be a golden investment

Investors who have increased their allocation to gold over the last year have been incredibly well rewarded, with gold now having rallied over 27% in 2020. Gold now sits at $1955, surpassing its previous high back in 2012 when it hit a record $1900 an ounce in the middle of the European debt crisis.

The extent to which the shiny metal is currently in favour is not only seen in the recent price rally however. Gold ETFs have now seen net inflows of +30% this year according to Bloomberg data, whilst some gold miners including Barrick and Newmont, who are particularly leveraged to the gold price, now sit at 5-year highs.

For gold, 2020 has been shaping up to be the perfect storm. Not only do gold prices move inversely to the dollar which has collapsed to a 2-year low, but they are also key beneficiaries of low interest rates and social and political uncertainty. With rates in the US staying low for the foreseeable future, Covid-19 showing little sign of abating and US-China tensions still high, dollar bulls have plenty to be excited about.

Despite the incredible rally this year and the commodity up over 10% in the last month, gold likely has further to run as all these catalysts are very much here to stay. Goldman Sachs also released a note yesterday increasing their price target on gold to $2,300 for gold over the next 12 months citing geopolitical tensions and record-low interest rates. For those feeling that is bullish, Barry Dawes over at Martin Place securities has called for $3,500 in two years, noting that the ease with which gold broke through its previous high of $1,923 shows the strength and potential endurance of the rally. It appears both the fundamentals and the technicals are in gold's favour.

With the 10-year treasury yield at 0.58%, the argument often made for not holding gold - that it pays nothing - holds a lot less power. In fact, buying treasuries - often seen as a safe haven alternative to gold - could lead to losses if the interest rate outlook changes or the US government's credit rating gets a downgrade. With the 10-year so low, just a small uptick could lead to notable losses for investors. Taking into consideration that gold's supply is also relatively fixed in comparison with US Treasuries, whose supply has been soaring, and the yellow metal also has a much stronger store of value.

With the catalysts for gold all holding strong through the rest of the year, gold should soon cross through the $2000 barrier and beyond. 2020 may just be the year that the dollar's status as the world's reserve currency was displaced.