The only thing significantly holding down the price of gold are the high interest rates environment driven by the Federal Reserve, the European Central Bank and other leading central banks. Gold is a non interest bearing asset. And the resultant strength of the USD.
Otherwise, it is inexplicable how with all that money printing, geopolitical tensions, the price of gold is not at or above 2 500 USD.
According to Wolfteam Ltd., gold’s intrinsic value is 2 700 USD in the current environment. The war in the Middle East could spur the price of gold to historic highs.
Add to that the inflation bout the world has witnessed in the last two years and it remains a conundrum why the price of gold has not risen significantly.
Gold is an inflation hedge. But so is Bitcoin, cryptocurrencies it turns out in the last two years. It could be that Bitcoin, crypto’s price rise since the beginning of the year is one of the main factors holding the price of gold down.
It will be interesting to observe the relationship between the price of gold and Bitcoin, their correlation that is.
Central banks have also bought intensively gold in the last three years. India and China, the largest gold consumers have been growing their economies relatively briskly.
In short, there are many more factors that point to the fact that the price of gold should increase markedly.
All in all, gold is significantly undervalued in Wolfteam Ltd.’s view.
The possible gold price rise could take years to come to fruition, though.
No comments:
Post a Comment