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As Goldman Sachs analysts have explained, one of the main factors to foster gold price’s further rise is concern over the US dollar’s global standing as a reserve currency.
Amid the rapid growth of gold price and the unstable position of the U.S. dollar, investment banking giant Goldman Sachs Group Inc (NYSE: GS) has made a thought-provoking statement about short- and long-term prospects of the precious metal. According to Goldman Sachs, the gold price will reach as much as $2,300 per ounce in 2022.
Besides, the bank believes that by that time, gold will become strong enough to eclipse the U.S. dollar as a reserve currency.
Gold Climbing to New Highs
In July, gold rallied to over $1,900 per ounce, having grown by 29% since the beginning of 2020. Goldman Sachs analysts believe there is still room for at least 20% further growth. According to the bank, gold will jump from its already record level of $1,931 to reach $2,300 in the next 12 months.
Goldman Sachs said:
“With more downside expected in US real interest rates, we are once again reiterating our long gold recommendation from March and are raising our 12-month gold and silver price forecasts to $2300/toz and $30/toz respectively from $2000/toz and $22/toz.”
As Goldman Sachs analysts have explained, one of the main factors to foster gold price’s further rise is concern over the US dollar’s global standing as a reserve currency.
They stated:
“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows. There are real concerns around the longevity of the U.S. dollar as a reserve currency.”
Besides, Goldman Sachs is expecting gold to replace the US dollar as a reserve currency, as under the conditions given, gold is a much safer asset to invest in.
The bank’s leading strategist Jeffrey Currie explained:
“Today the risk is from debasement of fiat currencies that sows the risk for inflation, and gold is the best hedge against debasement.”
Currently, gold is trading at $1,973.44 per ounce.
What about Bitcoin?
For many, digital currencies look more attractive investment than gold. Therefore, a question arises whether Bitcoin (BTC) is a better hedge against inflation than the precious metal. Bitcoin has significantly grown since January 2020 and had a stronger negative correlation with the dollar than gold since March.
At the moment of writing, Bitcoin is trading at $11,165. Analysts are positive about the currency’s future. For example, Barry Silbert, the CEO of Grayscale and major crypto VC firm DCG, expects the next resistance for Bitcoin to hover around $13,000. Bloomberg’s mid-year report hinted that the price of Bitcoin could soon rise above $12,000.