The market fundamentals and technicals both seem to be aligned with gold in mid-2019. The shiny yellow metal is up about 17% so far in 2019, with those gains really kicking in during May and this summer, and that’s actually up about 28% from a year ago. With prices back at $1,513 per ounce, some investors and market watchers are back to looking at upside levels of $1,800 and $2,000 per ounce, and some are even looking at scenarios that could drive gold higher.

During a major run of any commodity or index, it is not that unusual for bullish calls to continue to get even more bullish. The culmination of the U.S. and China trade war, continued geopolitical issues around the globe, ever lower U.S. interest rates, some $14 trillion or so in negative interest rate bonds and debt between Europe and Japan, gold seems to be back as everybody’s favorite commodity.

In the Merrill Lynch RIC Report for August, commodity strategist Michael Widmer makes a case for gold to reach $2,000 per ounce. Widmer argues that successive rounds of monetary easing’s side effects include higher gold prices. Successive rounds of easing also have delivered less meat to the economy, and financial markets seem to be much less enthusiastic about further stimulus. There are also other issues to look for that may be positive for gold stocks (see below).

One issue that was brought up was quantitative failure. This is when markets refocus on elevated debt levels or the lack of global growth, which likely would lead to a material increase in volatility. If central banks start to ease more aggressively, gold becomes an even more attractive asset. The Merrill Lynch one-year forecast for gold actually is still at $1,500 per ounce, but there is a stronger case laid out where $2,000 is potentially viable.

Even Germany’s 30-year bund now comes with negative interest rates, and more easing on the way should help sustain a bid for gold despite the sharp rise that has been seen in 2019. Another feather in the cap of gold bugs is that central banks keep buying gold, and they have also pushed up gold quotations by making persistent purchases. The RIC report further said:

In fact, monetary authorities recently decided not to renew the central bank gold agreement, as central banks have become net buyers. According to the World Gold Council, the majority of central banks expect global central bank gold reserves to increase over the next year. The motivation behind the respective reserve strategies varies, with the historical positioning, the long-term store of value, gold’s role as an effective portfolio diversifier and lack of default risk featuring the highest among emerging market and developed market institutions. Regardless of the various reasons why, the fact that central banks keep buying gold suggests to us that demand is likely to keep boosting the price of gold.

As far as the charts on gold, Merrill ‘s technical strategist Paul Ciana believes that an impulsive breakout for gold is bullish in the medium term and the current price action confirms an uptrend in gold prices is underway. Over the long term, Ciana even sees the possibility of a multiyear uptrend that could even take the price of gold up to $2,000 to $2,300 per ounce. Still, if gold were to fall below a key trend line back to a 200-week moving average at $1,300 and down to $1,260, then there would be concern that a bear trend formed. However, gold is more than $200 above that level today.

Where things get interesting is how Merrill also evaluates the top gold-mining stocks. After fresh mergers have created two dominant gold giants, there may be just as much or more upside there. Newmont Goldcorp Corp. (NYSE: NEM) is rated as Buy at Merrill Lynch in the individual equity department, while Barrick Gold Corp. (NYSE: GOLD) is rated only as Neutral.

Newmont Goldcorp was last seen with a $31.6 billion market value and a share price of $38.58, but the firm’s analysts Michael Jalonen and Lawson Winder have $48.50 price objective despite a recent miss on earnings. The all-in sustainables were higher, but the company sees production up with higher ore grades at a number of mines. Newmont’s new CEO taking over also already has focused on cost savings for operations. Merrill’s investment rationale said:

Our Buy rating is predicated on Newmont’s impressive pipeline of production replacement projects, strong forecast free cash flow generation and a solid balance sheet with a below industry average net debt to EBITDA ratio. On July 1st 2019, Newmont and Barrick Gold announced the creation of Nevada Gold Mines (38.5% to 61.5%) which could lead to $500 million of annual cost savings.

Merrill’s Neutral rating on Barrick Gold comes with an $18 price objective. The recent price of $18.39 also above the Refinitiv consensus target price of $17.75. Barrick closed out with a market cap of $32.2 billion.

To avoid share price performance metrics from being skewed longer term by the impact of mergers, we have only focused on year-to-date gains and more recently. Newmont Goldcorp shares have risen by 14% year to date, and they are up 24% over the past three months. Barrick Gold is up about 35% year to date, driven by a 50% gain in the prior quarter.

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