Gold’s runaway ascent in recent weeks is being fueled in large part by free-spending lawmakers and the subsequent threat to the U.S. dollar as a store of value, Goldman Sachs strategist said in a new note Tuesday.
“The recent surge in gold prices to new all-time highs has substantially outpaced both the rise in real rates and other US dollar alternatives, like the Euro, Yen and Swiss Franc. We believe this disconnect is being driven by a potential shift in the US Fed towards an inflationary bias against a backdrop of rising geopolitical tensions, elevated US domestic political and social uncertainty, and a growing second wave of Covid-19 related infections. Combined with a record level of debt accumulation by the US government, real concerns around the longevity of the US dollar as a reserve currency have started to emerge,” explained Goldman strategist Jeffrey Currie.
Gold prices have powered higher (despite the stock market’s surge from the March lows) to nearly $2,000 an ounce, an all-time high. Total gold holdings in gold-backed ETFs is at a record, seeing inflows in 18 straight weeks, according to Bloomberg data. The move has spread to gold focused equities such as Freeport McMoran (up 24% in the past six months) and of course the SPDR Gold Trust ETF (up 20% in the last six months).
Goldman’s Currie now expects gold prices to reach $2,300 an ounce within the next 12-months. Currie’s bullish take on the price of gold is consistent with what other experts have told Yahoo Finance.
“Gold is an enormous market, mostly liquid. Concurrent with the next downdraft in equities we’ll see gold smashing through $1,800 an ounce and continuing on its way to more than $2,000 by the end of the year,” Sprott CEO Peter Grosskopf said on Yahoo Finance’s The First Trade in late June. Clearly that call was dead on accurate.
Added Grosskopf, “I am a believer in libertarian policies, so I’ve been worried about the central bank’s hand in the economy for a long time. I think gold is a natural hedge to that.”
Goldman appears worried, too.