Goldman Sachs has forecast that gold prices will soon soar to new record-highs come 2021 as the current recession paves the way for increased inflation.
According to a report published by Goldman Sachs commodity analysts Jeffrey Currie and Mikhail Sprogis and later obtained by Business Insider, gold prices are still poised to skyrocket by 22% to $2,300 per ounce over the next 12 months, putting bullion at an all-time high. The investment bank decided to maintain its gold price target due to near-term risks of additional economic turmoil, despite positive news surrounding the COVID-19 vaccine.
The analysts noted that the bull market for gold is far from over, and will resume its climb come next year. Inflation expectations are poised to continue mounting, while the US dollar weakens and retail demand continues to slowly recover. However, the short run may prove to be problematic for gold prices, as they will have a tough time gaining traction in either a lower or higher direction.
Next year’s gold prices will be largely driven by real bond yields, which also include inflation. In the event of a decline in real five-year yields, gold prices will gain momentum. Currie and Sprogis noted the significance of five-year bonds and their impact on currency markets; when inflation rises, consumers will see a serious degradation in global currencies. As a result, the analysts forecast that short term U.S. real rates will average around -2.1% within the next five years.
In addition, the Goldman Sachs analysts anticipate that the demand for gold will increase in emerging markets. Both Indian and Chinese demand for gold has already showed signs of normalization, and with president-elect Joe Biden likely to take a relaxed approach to trade policy, the gold rally will gain even further momentum.
Information for this briefing was found via Business Insider. 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.