Economic uncertainty has pushed Americans into safer assets. With gold’s soaring performance this year, international banks are joining in on the action.
Australia and New Zealand Banking Group (ANZ) feels strongly about gold’s future, which by the way, has a lot to do with the dollar’s weak performance.
Many have pegged gold’s 10% retracement towards the rebound of the equities market, the vaccine announcement, and the minimal stabilization of the economy we’ve seen so far.
Sure, it’s nice to be hopeful and optimistic, but ANZ points out that an upbeat outlook for next year doesn’t change the macro environment responsible for driving gold higher.
The bank stated in a CNBC interview, “Gold’s main drivers, real interest rates and the U.S. dollar, are likely to provide support over the coming year. Using the U.S. Federal Reserve’s forecasts for rates and inflation, real rates should continue to push into negative territory. And a strong global growth pulse should see the USD weaken further.”
ANZ believes that gold will not only revisit its all-time high levels but that it will surpass it, setting a new record above $2,100.
“Our gold valuation model suggests gold should trade around $2,100/oz next year, assuming U.S. inflation rises to 1.7%…” and that the “USD index falls to 90…”
ANZ has made it clear their 12-month target on gold is $2,100/oz.
Other major investment banks, economists, and asset managers are all predicting the US dollar to weaken going into 2021.
Business Insider reports that the dollar has fallen nearly 4% so far in the fourth quarter, its weakest performance in the final three months of the year. The weakening is unlikely to slow anytime soon.
This is just the beginning of what’s to come in the new year.
Dollar uncertainty, a second stimulus package that has yet to be approved, despite it all- investors are banking on gold’s path to new highs.
“We will get a stimulus deal by the end of the month and the U.S. Federal Reserve will maintain its very loose monetary stance, and that should help underpin gold into 2021,” stated Michael Hewson, chief market analyst at CMC Markets UK.