Gold all set to record new multi-year highs from here on

Amar AmbaniIIFL Wealth & Asset Management Company The year 2016 is clearly high on gold as the yellow metal is back in the reckoning with a bang. When the gold rally, which began in 2000, lost momentum in 2011, many observers - economists and analysts alike - were quick to pronounce its premature end. But in hindsight, it’s more than apparent that the rally had merely paused for a while, it never ceased. We firmly believe that it’s all set to record new multi-year highs from here on. Based on our techno-fundamental analysis, we see it rising up to $2000 in the medium term with a possibility of touching $3,000 in the coming years. Gold prices have already risen by 25% in 2016 so far, in what certainly is only the beginning of an enduring joy ride.Our multi-year bullish proposition for the yellow metal is backed by a confluence of compelling factors.Monetary policies of most ruling governments across nations have unabashedly resorted to excessive printing of paper money, yet miserably failing in their stated objective of delivering growth. On the contrary, they have, knowingly or unknowingly, institutionalized a culture of fiscal indiscipline that threatens to manifest itself into scams and scandals, not to mention inglorious debt traps. The increasing fragility of financial markets has only darkened the clouds of economic gloom that pervade across the globe.We are now treading on even more slippery terrain: Central banks of the world have clearly lost the plot, more bound by their allegiance to ruling governments rather than by the commitment to the larger cause of depositors. Negative interest rates in various economies and the persistent devaluation of paper currencies have raised serious questions about the worth and future of paper assets. People are fast losing faith in the orchestrated solidarity of governments and unions, which is why disorderly disintegration has become the new order of the day. We are already witnessing atypical events like the Brexit, rooted in a rebellious rejection of the status quo. Who knows, the future may be ripe with Grexit, Byegium, Departugal and more.The chronic attempts at monetary manipulation, as also their corrosive effects, has made the need for an alternate currency even more acute, a currency which is safe, rewarding and relatively insulated from the after-effects of a shaky environment. Of all alternate currencies, Gold comes closest to wear the crown for its safety, universality, and most importantly for its relative inflexibility and the natural limits on its supply. Besides, it performs exceptionally well in times of hyperinflation and deflation.Given the ongoing economic obscurity, it’s highly likely that Fed would do a complete U-turn on the process of policy normalization. A possibility of Fed replicating the monetary policy of ECB and BOJ also can’t be ruled out. Indecisiveness and desperation of central banks amid slow or no growth will only aggravate the degree of uncertainty, which is a perfect trigger for higher gold prices. Strong investment demand across the globe is clear and evident, as the phenomenal rise in Gold ETF inflows reflect. Even central banks are stockpiling gold, signifying a clear endeavor to hedge against growing economic uncertainty and geopolitical risks.We infer that the yellow metal is clearly on a multi-year upward trajectory from here on.