Goldman Sachs has revised its gold forecast as of Friday, predicting prices to increase to $2,000 per ounce within the next year, as a result of a weakened US dollar, falling interest rates, and uneasiness among investors in wake of the coronavirus pandemic.
Back in March, gold prices were on the incline as coronavirus infection rates began to exponentially increase. Emerging market nations experienced a “wealth shock,” as gold imports to India plummeted in April and May, and Russia’s central bank refrained from purchasing gold since the fall of oil prices. However, an increased uncertainty and fear regarding the economic landscape has caused a sudden spike in the demand for gold by investors in developed countries. As a result, gold volumes in exchange-traded funds increased by over 20% since the beginning of the year.
Due to the 18% increase in demand for gold among investors, Goldman Sachs analysts increased their three, six, and twelve-month gold price forecasts from $1,600 to $1,650, $1,800 to $1,800, and $1,900 to $2,000, respectively. However, in order for gold prices to reach $2,000, the inflation rate will need to increase past the 2% target set out by the Federal Reserve. As a result, Goldman Sachs is expecting inflation to be higher than the 2008 Financial Crisis due to significantly larger monetary and fiscal stimulus, lack of increased bank regulations, and reduced austerity policies.
Information for this briefing was found via Goldman Sachs and Kitco. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.