Both AMP Capital's Shane Oliver and Saxo Capital Markets' Eleanor Creagh believe there is further upside for gold, as investors desperate for an inflationary hedge send prices soaring higher.
Futures contracts for gold hit all-time highs on Monday, but have since dropped as investors cash in on profits from the yellow metal.
The December contracts for gold futures surpassed $2782 (US$1993) on Monday, but dropped to around US$1930 the following day. They have slowly regained momentum since Tuesday, with contracts trading around US$1980 at the time of writing.
It comes as ETF Securities reports its Physical Gold ETF saw its assets under management double in less than a year to hit $2 billion, with inflows of $578 million into the fund this year alone.
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Towards a perfect currency solution
These inflows highlight the truism that in times of trouble investors turn to gold, ETF Securities chief executive Kris Walesby said.
"Without wishing to sound too pessimistic, let's not forget that gold should do well if, and when, investors realistically evaluate the changes of a sustained equity market recovery compared to the possibility that the world may be entering the first great depression of the 21st century," he said.
Oliver believes gold's record highs have a weakening US dollar to blame.
"The recent surge in gold and the Australian dollar have one thing in common - namely an emerging breakdown in the US dollar. The $US surged during the early phase of the coronavirus panic in response to safe haven demand," he said.
"Right now, the $US looks to be breaking down."
Historically, a falling US dollar reflects a reflationary environment, highlighting growing confidence in the global economic outlook.
This can be positive for emerging countries and commodities, Oliver said, including gold.
Alongside the fall of the US dollar, several other factors have helped push gold prices higher, he said.
These include investors using gold as a hedge against inflation on the basis that quantitative easing will generate higher consumer price inflation, as well as investors seeing gold as an alternative to paper currencies.
"Perhaps most importantly, the opportunity cost of holding gold versus cash or government bonds as an alternative store of value has collapsed again thanks to the renewed collapse in interest rates and bond yields," Oliver added.
Gold therefore has further upside, he said, until central banks start to tighten and bond yields rise significantly.
Similarly, Creagh believes both silver and gold will continue to push all-time highs.
"As real yields have collapsed, along with the US Dollar Index steadily weakening to a 22-month low, virus and geopolitical uncertainties have remained elevated, spurring momentum across the precious metals spectrum, with gold and silver charging higher over the past week," she said.
"Spot gold has broken through the 2011 highs, hitting a fresh record as real yields have pushed deep into negative territory."
However, she argues that gold's latest rally looks "stretched" and that a correction may be due.
"Speculation surrounding the prospects of yield curve control may just provide a final push for spot gold up to US$2000, before capitulation and consolidation," Creagh said.
She believes long term demand for gold will continue despite recent volatility.
"Financial repression at large keeps the strategic view on gold front and centre - the hedge against monetization of expanding deficits, exploding central bank balance sheets, debasement of fiat currency, and yield curve control," Creagh said.
"In other words, a store of value outside of a world mired by central bank largesse.
"This means gold has a growing importance within cross-asset portfolios and although tactically, the run higher may be stretched and due for a period of consolidation, long term demand for gold remains."