Gold Remains the Most Attractive Asset Class with US Equities and Bonds Very Expensive

Gold equity analysts just do not believe that gold prices are going to stay high. The 18 analysts offering 12-month price forecasts for Barrick Gold Corp have a median target of 34.52, with a high estimate of 47.00 and a low estimate of 30.00. The median estimate represents a +19.56% increase from the last price of 28.87.

The primary reason is that they do not believe the price of gold will generally keep rising. According to Bloomberg, the median (average price) forecast for the next few years is lower than we see today.

Over the past 20 years, we can see spot gold is up 6.7x and gold equities are up 3.8x. in percentage terms, gold stocks 7.7% versus 10.3% annualized.

There are two major driving factors for gold. Negative absolute yields and negative real yields. Gold has virtual no competition from fixed income in terms of a yield. And gold stocks now yield about 0.8 percent, which is the same nominal yield that we see in the US 10-year bond. Globally, we see more than $17 trillion in negative yielding debt again.

When you adjust for inflation, real yields are negative and there are not too many charts with this type of correlation. So the 24K question is when does this end and what changes it? With central banks needing to monetize most of the new debt and seeking higher inflation, we have the recipe for more negative real rates and a marketplace that does not believe gold prices can be sustained let alone keep moving higher.

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