Economic prognostication is notoriously difficult and fraught with the potential for error. But that doesn’t mean that it’s worthless or meaningless. Analysts aren’t idiots, and even if they may not get all the details right, it can help to pay attention to their analysis to keep on top of economic trends.
If you’re wondering what the future holds for your investments, you’re probably going to want to pay attention to what analysts are saying. With markets still subject to significant amounts of uncertainty, the investment decisions you make within the next year could determine the performance of your portfolio over the next decade or more.
Citi Sees Gold at $2,500
Analysts at Citigroup have come out with an aggressive call for gold, expecting it to hit $2,500 in 2021. That’s a pretty significant price target, but not completely unreasonable when you think about how gold grew from $1,500 to over $2,000 at one point this year. Percentagewise, that forecast for next year is actually conservative, expecting less potential growth next year than this year.
The reasoning behind this call for $2,500 probably isn’t anything you haven’t read here before. Among the reasons for gold to continue climbing are further economic stimulus, rising inflation expectations, a weaker dollar, and continued volatility in markets. Other analysts, such as ETF Trends’ Dave Nadig, echoed Citi’s sentiments. As Nadig, a self-declared non-gold bug said, “It’s hard to argue with thousands of years of history of folks looking to gold as a store of value in times of crisis, and I don’t know what we’re in if it’s not a time of crisis.”
If that bullish call for gold has you thinking about investing in gold, maybe it’s time to look at investing through a gold IRA. A gold IRA allows you to invest in physical gold coins or bars while still maintaining the same tax advantages as a conventional IRA account. You can even roll over or transfer assets from existing retirement accounts into a gold IRA, allowing you to protect your hard-earned retirement savings.
Goldman Sees Gold at $2,300
Citigroup analysts aren’t the only ones bullish on gold. Analysts at Goldman Sachs are predicting a $2,300 per ounce price target for gold next year. Goldman’s reasoning largely followed that of Citi; a weak economy, the prospect of higher inflation, low short-term interest rates, rebounding demand in emerging markets, and a weaker dollar all will combine to push gold higher.
1. Higher Inflation
Goldman expects inflation to reach at least 3% next year. That’s perhaps a bit conservative, given how the Fed has said it’s willing to let inflation “overshoot” its 2% long-term target rate for some time, until the average inflation rate over time gets to 2%. Don’t be surprised to see 4% or higher inflation at times, particularly if the federal government passes more stimulus and the Fed steps in to monetize the new debt that will be issued to pay for that. The higher inflation rises, and the higher inflation expectations rise, the more gold demand should rise.
2. Rising Demand From Emerging Markets
India may be an emerging market country, but its gold market is a major driver of world gold prices. The same goes for China, which is not only the world’s largest consumer of gold but also the world’s largest producer. Demand in both of those countries took a hit earlier this year, but demand seems to have rebounded. With two of the top consumers of gold back online, that should help extend gold’s bullish streak.
Particularly important will be the demand from retail investors, which has been driving gold demand worldwide in recent months. While demand from other sectors and from exchange-traded funds should also rise, retail demand is where we’ll see much of the pressure on gold supply that should lead to increasing prices.
3. Weaker Dollar
With the Federal Reserve having added over $3 trillion to its balance sheet earlier this year as part of the government’s response to COVID, a more than 70% increase in just a few short months, anyone who thinks the dollar isn’t going to get significantly weaker obviously doesn’t understand anything about economics.
We’ve seen perhaps the most expansive response to a crisis ever, and it may be only the tip of the iceberg. There could still be trillions more dollars of monetary stimulus coming next year, and each dollar created out of thin air will decrease the value of those already in existence.
Where Are Stock Markets Heading?
Stock markets have been on a roller coaster for the last several years, hitting all-time highs then plunging, then recovering. Wash, rinse, and repeat. Many investors have given up trying to figure out what’s going on and just ride the wave. Thus far many have made great gains, at least on paper, as stock markets continue to ride the monetary tsunami to all-time highs. But could they come crashing down again?
Morgan Stanley’s chief investment officer thinks we’ll see one last correction this year, with a 12% drop in stock markets by the end of the year. For 2021 he’s bullish, expecting a roughly 10% rise from current levels. That remains to be seen. But even if stock markets are able to delay the day of reckoning and put off a major crash for one more year, it’s encouraging to gold investors that analysts still expect gold to outperform stock markets, just like gold has done this year.
What We Can Expect Next Year
About all we can say for certain is that next year remains highly uncertain. Even Fed Chairman Jay Powell has expressed that, stating that the economic outlook for next year has become “extraordinarily uncertain.” There’s more than a bit of truth to that, with worsening economic conditions, continued high unemployment, and a new President combining to create an atmosphere of uncertainty that has more than a few investors getting nervous.
Thankfully there’s still some certainty in the market, namely that gold continues to provide investors with safety and security in the face of market volatility and weakness. So if you’re looking to protect your retirement savings, give the experts at Goldco a call today to find out how gold can keep your investments safe and secure next year and beyond.