Gold prices are breaking records, rising from all-time highs to new highs. Thus, the gold market saw one of the quietest bull rallies. However, according to a famous economist and market analyst, investors should no longer ignore the precious metal.
“Don’t be afraid to invest at current levels!”
Even at these high prices, gold still has plenty of upside potential, Rosenberg Research founder David Rosenberg said in a report last week. He also noted that now is the time to overweight the asset. In this context, Rosenberg made the following statement:
Every well-diversified portfolio should include gold, and we currently recommend an aggressive overweight. This will act as a hedge against geopolitical and financial risks, offer a safe haven against a collapse in the stock bull run, and provide positive exposure to the upcoming easing cycle and period of dollar weakness. Don’t be afraid to invest at current levels.
Gold still advanced despite all the negativities!
Rosenberg says his base case scenario in the current environment is for gold to reach $2,500. He also notes that any number of catalysts could push prices even to $3,000. The bullish outlook comes as gold prices find support above $2,350. Rosenberg notes that not only has gold outperformed the S&P 500, but its gains have come in a traditionally difficult environment. In this regard, the economist underlines the following points:
The rise in the gold price comes at a time when the dollar is strengthening, inflation expectations are falling, and the Fed is shifting market expectations toward a “higher for longer” belief. All of these developments would typically hurt the gold price, but it still advanced.
What are the factors supporting gold prices?
However, he adds that the broader gold market is focused on more than just U.S. macroeconomic conditions. Rosenberg states that gold has made significant gains against all major global currencies. The biggest factor supporting gold continues to be active central bank purchases as countries move away from over-reliance on the US dollar, the economist says. cryptokoin.comAs you follow from , the Central Bank of China has been the largest gold buyer in the last two years. So much so that he bought bullion continuously for 17 months.
At the same time, emerging markets are seeing strong physical demand from retail investors. Because investors want to protect their wealth and purchasing power. Finally, Rosenberg states that gold continues to benefit as a safe haven as economic risks and geopolitical uncertainty dominate global financial markets.
Two scenarios for gold prices
Gold has largely ignored the Fed’s threat to keep rates higher for longer than expected. However, Rosenberg expects traditional correlations to emerge once the Fed starts lowering interest rates.
Rosenberg’s team developed a comprehensive model for the gold market. The first scenario involves the US economy avoiding recession. Rosenberg predicts that gold will rise 10% as the central bank begins to lower interest rates. This model pushes interest rates above post-2008 financial crisis levels. At the same time, if a recession occurs that would push interest rates back to the averages seen over the past decade, Rosenberg estimates gold would rise 15%. In this context, the economist makes the following assessment:
Of course, these scenarios do not include several fundamental factors that could push gold prices even higher. Further deterioration of the global geopolitical situation will be positive for gold. In addition to the impact of interest rates, deteriorations in financial conditions (such as higher spreads caused by rising corporate defaults) will also encourage gold. Finally, repeated and increasingly dire warnings about the fragility of the U.S. financial situation may support bullion buyers. Combining these observations with our modeling work, we see that the downside risk to the gold price is limited, but there is much more room for upside.
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