For months, we’ve predicted a massive rally for gold.
Now, it’s here. Gold is hitting multiple record highs, and analysts are raising their forecasts through the roof.
Goldman Sachs says gold could hit $2,700 per ounce. Bank of America says $3,000 is possible. And UBS says gold could skyrocket to a whopping $4,000.
The question is:
Why are analysts forecasting such high gold prices?
First, they know the latest CPI print shows inflation is running hotter than expected. They know the US dollar is losing purchasing power to inflation. And they know investors are moving into gold because there’s little incentive to hold savings and investments exclusively in dollars when inflation’s “hidden tax” is eating up your money.
Especially when gold—widely considered a reliable hedge against inflation—is rallying to record highs.
Business Insider says market vet Ed Yardeni agrees and predicts gold has another 50% upside “because inflation could follow the path it did in the 1970s.”
In a note to clients last Sunday, Yardeni said, “$3,000–$3,500 per ounce would be a realistic target for gold through 2025.”
However, Fed Chief Powell is cautiously optimistic about inflation and says possible rate cuts are on the way.
If the Fed cuts rates, it could supply yet another tailwind for gold.
Why? Because gold shares an inverse relationship with interest rates. When rates fall, yields on fixed-income assets like bonds tend to drop, and this could make gold even more attractive to investors.
Economist David Rosenberg thinks so and says rate cuts (and rising geopolitical conflict) could push gold up to at least $3,000.
Meanwhile…
Global central banks—The World’s Smartest Money—are unloading US Treasuries and hoovering up the world’s gold supply at a rate never seen in 50 years.
According to the World Gold Council’s April 2024 report, the People’s Bank of China is leading the pack and has bought gold by the ton for 17 straight months.
China also happens to be the second-largest foreign holder of US debt. And in February alone, the country dumped $22.7 billion in US Treasuries.
Which is a big problem for the US Treasury because…
The US federal government is $34 trillion in debt, and it has been running deep deficits for multiple months.
At this point, federal tax receipts aren’t enough to cover Washington’s out-of-control spending habits. And foreign investors are selling off US debt to minimize the impact on their assets.
This means…
Unless the Fed finds another way to borrow enough cash to pay down the federal debt bill, the central bank may have to start printing money again.
And with more money printing, we’re right back to more inflation, more dollar devaluation and more reasons for American investors and foreign debt holders to diversify with gold.
Still, some say gold couldn’t possibly rise any higher.
They worry they’ve missed the boat.
But the truth is gold’s price has been hitting new highs during times of economic uncertainty like this for well over 100 years.
Now, with so much uncertainty sweeping the globe, gold’s price may continue rising in the long term as it historically has.
And if the world’s macroeconomic turmoil continues to expand, analysts’ forecasts of $3,000–$4,000 may prove too low.
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