Macquarie Analyst: Gold Has 75% Chance of Rallying Further

gold-1575220-640x480Viktor Shvets, global strategist for investment bank Macquarie Group, recently published some bullish notes on gold, which he believes will rally in three out of four major scenarios.

Shvets said in a note to clients:

“If you think of gold, the only way gold loses is if normal business and private sector cycles come back. If that is the case, gold goes back 100 dollars per ounce. The other outcomes, deflation, stagflation, hyperinflation are good for gold.”

“If people become more confident, gold will ease back. But when the chickens come home to roost, gold will come back.”

So that means in three out of four potential economic scenarios, gold prices will rise precipitously — a 75% chance.

Shvets thinks that people are growing wearing of fixed income markets that don’t generate income, and a stock market rally that has run out of steam amid anemic economic growth. World governments could resort to drastic measures if commodities like gold or cryptocurrencies begin to gain real steam:

“Bitcoin and gold can both be prohibited by the government. How do you force people to do things they are reluctant to do? The way to do it is to close down alternatives like real estate, cash, and gold. You could force people underground, hoarding cash with warehouse receipts, or warehousing gold illegally.”

Finally, Shvets explores the potential for new global standards other than the U.S. dollar:

“Right now we are still on the U.S. dollar standard. Since the Bretton Woods system ended in 1971, we are on the U.S. dollar standard. How will the monetary system rebase itself? Is it going to be gold, is it going to be a global currency? British economist John Maynard Keynes was already suggesting in 1944 to create a global currency.”

Doomsday scenarios notwithstanding, gold will likely rally if any of the proposed three out of four scenarios take place.

Those are pretty good odds.

GLD-2016-08-25

The SPDR Gold Trust ETF (NYSE:GLD) fell $0.25 (-0.20%) to $126.07 per share in Thursday morning trading. The world’s largest gold ETF has gained 24% since the start of 2016, but has been mostly flat over the past two months.

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