Last week, Goldman Sachs published a report in which it raises its 12-month price prediction for gold to $2,150 per ounce. This is a slight increase from its prior $2,000 price forecast. It seems the bank isn’t ready to give up on the precious metal, given its long gold trade recommendation for 2022.
This new positive outlook follows the disappointing performance of gold, which was seen last year as its prices closed the year down about 4%. The bank stated that the drop observed in 2021 was understandable in an environment with strong economic activity, with many expecting that increasing inflation wouldn’t occur in the long term.
In the report, the analysts stated that stable prices and high growth caused a surge across most risk-on assets, particularly cryptocurrencies. This, they explained, caused direct competition between gold and Bitcoin as a store of value and led to the investment demand for gold falling because investors weren’t seeking a hedge against inflation. They noted that the dollar was also supported by the divergence in international growth expectations. However, the bank expects this 2021 trend to reverse this year.
The analysts stated that the current international growth-inflation situation was noticeably different, explaining that the likelihood of a new hiking cycle causing a risk-off environment across various asset classes had led economists to predict a material deceleration in growth in the United States. They explained that a long gold position would be effective in the present macro environment, particularly for investors who sought ways to hedge their portfolios from risks of falling valuations and a growth-slowdown.
The analysts also noted that in contrast to expectations from investors, the precious metal had been resilient during the recent hike of interest rates in the U.S., adding that this was because of its status as a defensive and inflation-hedging asset. The bank’s report was released just days before the Federal Reserve’s monetary policy meeting for January.
Analysts expect that the rising risk of higher inflation will prompt the Fed to tighten its monetary policies, which will burden economic growth. The bank already lowered its growth projections for the nation as it is unlikely that the government will proceed with its fiscal stimulus plans.
The analysts note in the report that as economic growth in the U.S. slows this year, the perception of the market on recession probability may rise, which will in turn, position gold for higher investor interest, especially for stocks of established companies such as StraightUp Resources Inc. (CSE: ST) (OTCQB: STUPF).
NOTE TO INVESTORS: The latest news and updates relating to StraightUp Resources Inc. (CSE: ST) (OTCQB: STUPF) are available in the company’s newsroom at https://ibn.fm/STUPF
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