“The quick rally is now on a bit of a recess”, Joshua Rotbart

Gold prices have begun to take a slow pace after its peak price. But the rising demands are still in place since March. The pandemic leads to disruption in the supply chain. Still people are storing the metal and not trying to sell it.

There is a very active trading happening among investors. They are increasing their holdings or coming into this physical bullion.

These investors want to get financial protection against gold: according to Joshua Rotbart, J. Rotbart & co. managing partner and founder.

“We also see some liquidation by clients that are brought early. From 2019 January we are up almost 50%. So a lot of clients, who bought in 2019, are liquidating some of their holdings either to take cash or to cover for losses and margin calls in other assets. And interestingly we have clients come to us to get finance against their gold.” Rotbart says.

“So they are not willing to give up their safe asset. They are seeing some opportunities in other assets or they want to cover losses in other assets.” He adds.

The pandemic led to many volatile situations. Thus it caused concern among investors and they started ensuring the safety of their assets.

Rotbart says that the uncertainties related to the pandemic are still there and we are not out of the situation yet.

“We were optimistic before the pandemic and are optimistic now. We have a global recession. We have a pandemic that we are not sure how and when we will be out of the woods. We are not out of the woods yet.” He adds.

Gold in hedging plans

Gold is a hedge against risks. Investors are trying to get their hands on gold as a safe alternative.

Investors feel like they don’t have better options. The dollar is weakening too. All these create volatilities and thus the need of stimulus plans arise.

“We still have the stimulus plan. We just announced a big stimulus plan yesterday. This means more printing of money, more continuing of the zero interest rates.”

Gold price hike

Bullion price saw a hike and slow pace as well. There are ups and downs in the price. Nothing goes up in a straight line. The quick rally is now on a bit of a recess according to Rotbart.

But for investors they have to estimate the risks and other alternative options. Since the elections are near these risk factors should be considered.

As per the estimates of Rotbart, gold price might reach $2,200 and $2,300 by mid 2021.

“Gold price reflects the investors’ concerns. We are not done yet with the pandemic. We expect a slow painful recovery. When investors look at this, inflation might not be a big deal because there is also dollar weakening.”

Silver

Compared to gold, silver prices are low. Silver prices went up 20% this year. This metal was unappreciated and it has a slower pace compared to gold, says Rotbart.

When gold prices rise, silver usually follows the price. Silver traditionally matches the gold to silver ratio.

“We are targeting a Gold-Silver ratio between 70 to 60. Before mid 2020, we had a Gold and Silver ratio of almost 100. Now we are back to around 70 to 75 ratio.” He says.

Investors concerns and ETFs

Rotbart says that investors are holding 10% in their precious metals holdings. Their main concern is the price fluctuations.

Apart from that ETFs and central banks have a major role in the price variations.

This year the main driver behind the price will be the central banks and the ETFs. ETFs are holding all time high of almost 4000 tons of Assets Under Management now. They are a good tactic to get into gold, He says.

“Cost structures of ETF and investor companies are similar. Strategically, holding physical assets still gives investors the comfort and the sense of the peace of mind they work for.” Rotbart further adds.

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