The U.S. economy is nowhere near out of the woods yet, with it being far from certain that the Federal Reserve has steered the ship towards a soft landing, analysts say.
According to new analysis by research firm, Capitalight Research, it’s far from a given that an economic downturn won’t wreak havoc on the economy. Its analysts say that there are many danger zones to navigate, with the threat of recession growing as long as the Feds opt to maintain higher interest rates and resist calls to begin cuts.
Chantelle Schieven, who serves as Capitalight’s head of research, says that a big picture view reveals real cause for concern, with global economic struggles and not insignificant geopolitical uncertainty.
Couple these factors with continuing central bank demand and the fact that at some point the Federal Reserve will be forced to cut rates and Capitalight forecasts project that gold prices will surge to a new high of £1,906 (2,400) in 2024.
Schieven says that the Federal Reserve’s fixation with a 2% inflation target isn’t sustainable and at some point, it will be forced to take action, which will then trigger higher prices.
She said “The Fed has been fairly clear that it won’t adjust its target, but we have seen them massage this target before. We have seen it many times before, the Fed holds its stance until it doesn’t.
“When you look at the nature of the economy, the way things are changing and demographics are shifting, it’s unlikely we are going to see inflation sustainably around 2%. New domestic supply chains and demand for critical commodities as part of the green energy transition are only two factors that will likely keep inflation above 2% for the next five years.”
Central bank buying behaviour will also help to energise gold prices, with higher demand expected from nations such as China.
Schieven adds, “The globalisation trend continues to weaken as the divide between the East and West widens. This is forcing central banks to diversify out of the U.S. dollar and into gold. We have not seen a peak in central bank demand. If China wants to compete with the West, a 4% holding in gold just isn’t enough.”
Notably, Capitalight says that it doesn’t consider its £1,906 ($2,400) price target to be overly bullish, suggesting that there could be even further for the bulls to run before the end of the year.
Schieven concludes, “When you look around and see everything that is happening in the global economy, you see all the risks in the market and geopolitical uncertainty; our forecast doesn’t seem overly bullish. There is enough uncertainty and risk in the economy for investors to build a strong defensive position in their portfolios.”
Don’t wait. Take action now. Buy gold today.
