Could gold head back up to US$2000 an ounce?

Following escalating fears of a Russian invasion of Ukraine, gold miners dominated the leaderboard yesterday, on the back of a three-month high in the gold price as some investors look for a safe haven.

The mobilisation of 100,000 Russian troops on the Ukrainian border seems to have given gold a much-needed kicker.

Assuming geopolitical risks don’t abate any time soon, VanEck is speculating that the price of gold could again break through $US2000 an ounce.

Interestingly, Stewart Glickman, energy equity analyst at CFRA Research in New York recently noted that while oil and gold are now seen as safer havens, “other assets are being inflated out.”

Gold ETFs benefit

It’s interesting to note that investors seem comfortable increasing their exposure to gold as a store of value, even in the face of a pretty ballsie tightening cycle by the Federal Reserve, and a stronger US$.

Due in part to investor angst over rising interest rates, gold-backed exchange-traded funds (ETF) recorded net inflows of 46.3 tonnes ($US2.7bn) in January, which based on World Gold Council data is the highest level since May.

The spot market price was up 0.5% to $US1867.42 an ounce after surging nearly 2% on Friday, while bullion for April delivery gained 1.5% to $1869.4 on Comex.

Gold miners to benefit

Three gold miners included amongst best performing stocks yesterday were Regis Resources (ASX: RRL) up 8.15%, Evolution Mining (ASX: EVN) up 7.90% and Northern Star Resources (ASX: NST) up 5.88%.

Based on the consensus price target of brokers that cover these three gold miners (as reported by FN Arena) Regis Resources, Evolution Mining, and Northern Star are currently trading with 11.7%, 7.6% and 28.1% upside to the current price.

Where is the gold price heading?

Late last year, well before heightened geopolitical tensions in Eastern Europe, Macquarie upgraded its long-term gold prices by 7%.

While Macquarie expects the three above-mention gold stocks to be the biggest beneficiaries of the broker’s gold price forecast upgrade, the broker favours Northern Star due to the company’s relatively lower-risk production growth.

Among the smaller cap ASX gold stocks, Macquarie also favours Silver Lake Resources Limited (ASX: SLR) and Perseus Mining Limited (ASX: PRU) for their low-cost production growth.

However, not all brokers are convinced the lurch towards safe-havens creates long-term momentum for the gold price.

For example, Citi analysts forecast average gold prices around US$1,685/oz in 2022, declining to US$1,500/oz in 2023, versus 2020/2021 annual mean prices near US$1,800/oz.

Whether Citi increases its outlook for gold in light of the Russia/Ukraine spate remains to be seen.