Gold should be US$150 an ounce higher [Global Nuggets Newsletter]
Gold would be US$150 an ounce higher if it wasn’t for the high US$
According to Wells Fargo, the US-based banking giant, the gold price is being held down by an exceptionally high US dollar and should be at least $150 higher than where it stands now. In fact, according to John LaForge, Wells Fargo head of asset strategy, "I am shocked that gold doesn’t want to move. The dollar is what’s holding it back. If it wasn’t for the strong dollar price, gold would be at least $1900 an ounce". He remains confident that the yellow metal will go past US$2000 an ounce once the US$ weakens.
This is a great time to strengthen your gold holdings.
So, what’s happening with the US$ and why is it so strong right now? The past week saw the US$ at a 2-decade high against the Euro, with one Euro currently worth less than a dollar. Economically, the next 6 months look dire for much of Europe, with Germany entering recession (and likely all other EU nations will follow, plus the UK), winter around the corner and Putin squeezing energy supplies across the region. There are signs of civil unrest and the rise of the far right to add to the mix. In Asia, there is real talk of China preparing for war against the US. And in the US last Friday, the Fed ran a symposium in Jackson Hole, Wyoming, giving its forecasts on the US and global economies. It wasn’t easy listening, as the Fed outlined plans to significantly increase interest rates over the coming months to pull back inflation. The US dollar is seen as a safe-haven asset, hence its strength. This will change for sure, but for now, it’s likely to remain high whilst the western world struggles to control inflation. There’s an interesting side story on this coming out of Russia. President Putin has had much of his dollar trade reduced due to sanctions following the Ukraine invasion. But he has been innovative in counterbalancing this by attempting to ‘de-dollarize’ the risk. He has been working among the BRICS countries (Brazil, Russia, India, China and South Africa) to introduce an alternative to the US dollar based on the Ruble and Yuan. These countries are, at best, ‘agnostic’ towards the western sanctions and have not come out against Putin’s invasion. This venture may seem a little ‘out there’, but it has momentum and could even be underpinned by GOLD.
This Week's News
Here are some nuggets from this week to help understand the dynamics of the precious metals market and what drives metal prices: