JP Morgan: Gold Entering a New and Long Bull Market

This article was submitted by Fabian Gambino, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

Are Wall Street banks finally getting on the right side of the gold trade?

In an interview with CNBC, Solita Marcelli, global head of fixed income at JP Morgan, revealed that the Wall Street investment bank is recommending that clients position themselves for a “new and very long” bull market in gold.

She explained that negative interest rates around the world are making gold a more attractive investment. Since gold is a non-yielding asset and has minimal storage costs, it actually compares quite favorably with the increasing number of negative yield bonds on the global stage. It has a positive carry.

Solita suggested that central banks might consider diversifying their reserves into gold with the fear that they might be getting negative rates on their existing holdings. Gold is a great portfolio hedge in an environment where world government bonds rates are at historical lows. It may, in fact, replace government bonds as the next risk off trade.

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Near term support for gold is in the $1,250 – $1,260 range, where profit taking has already tested once. Gold year to date remains up 20%. More risk off sentiment and more negative yields will drive more retail participation in gold adding more support and momentum. Solita believes there will be more legs to the gold market this year with a high probability of gold reaching $1,400 at some point.

This isn’t the first time this year that a major bank has gone long gold. Earlier this year, Paul Ciana, of Merrill Lynch Bank of America, stated that Bank of America went long gold at $1,089 looking for a potential rise as high as $1,550.

Perhaps Wall Street is finally getting on the right side of things when it comes to the yellow metal.

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