Goldman Sachs: "Gold's bull market will continue into 2021 for these 3 reasons"
Interesting article.............Is it time to stock up?
Nov. 13, 2020
The more than 20% rally in gold year-to-date is set to continue into 2021 as the structural bull market continues on for the precious metal.
That's according to Goldman Sachs, who said in a note on Friday that recent weakness in gold prices could be explained by the rotation towards value from defensive assets like gold and long term growth stocks.
In the short-term, gold prices could continue to consolidate sideways, as "it may be difficult for gold to generate meaningful momentum in either a higher or lower direction," Goldman said. But in the longer-term, gold "should benefit from continued strong investment demand."
1. "Inflation expectations move higher."
"In this cycle, we believe the gold market, at least initially, is likely to follow the same path as after the Great Financial Crisis and grow strongly into the recovery phase of the business cycle as inflation concerns become central to the forecast," Goldman said.
Goldman's economics team forecasts a temporary bounce in inflation to 3% next year, which could help spur demand for gold.
And with policies surrounding the COVID-19 pandemic focused on fiscal spending, combined with household balance sheets at better levels than they were coming out of the 2008 recession, "the Fed appears more willing to tolerate a temporary inflation overshoot," Goldman said.
"This may well lead to market participant concerns over the long-term inflation rate and more inflows into gold in order to hedge it," Goldman said.
2. "The US dollar weakens."
3. "Emerging Market retail demand continues to recover."
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