As Western currency maintains its decline and nations hint default, gold continues its inverse reaction. With seemingly no end in the immediate future of the West, the burning question in many investors’ minds is: Where is gold headed?
In a recent interview with CNBC, Chief Executive of Hinde Capital Ben Davies boldly answers that question with a shocking figure of $5,000 USD per ounce.
While many others disagree with the $5,000 figure, few do not disagree that gold is nowhere near done with its continuous rising patterns and record-breaking streaks.
Recently, Goldman Sachs set the 12-month benchmark of gold at a comparatively seemingly low $1,860 per ounce, although the spot price of on Tuesday already came teasingly close to it at $1,778 per ounce. Goldman based its projections on the combination of: the US Treasury’s 10 year yields, a weaker outlook in the US economy, gold’s low price in comparison to inflation-adjusted highs in the 1980s, and the continuous debt problems in the US and Europe.
Ashok Shah, CIO of London and Capital, also agrees that gold will rise in value, however, believes that any prediction of gold price, especially since many investors are starting to shy away from the USD.
To his point, Davies argues that the relationship between Asian exporters and Western debtors is causing China to shun the USD. In response, the US and others apply monetary policies in an attempt to fix the ailing market, however, the policies focused too much on preventing the bond market from crashing, instead of fixing “the transmission mechanism between markets and the real economy [which] is broken.” Thus, investors are “fleeing all fiat currencies into an asset that has no liabilities… Gold is an inverse function of currency.”
Davies believes that these reasons and the timing of when holders start to exit dollar bonds will push the price of gold toward his prediction.