Financial analysts forecast the growth of gold prices. If it happens, will the world’s biggest digital asset follow the uptrend of the precious metal?
Bloomberg Intelligence as well as financial experts from the biggest US banks predict that gold’s price will be growing by 2021. According to Bloomberg’s Crypto Outlook, released this month, the same trend may affect the price of digital gold, as both assets are correlating.
The gold price increased nearly by 385% within the past year and peaked at $1.772 per ounce at the time of publishing. The highs were last seen back in 2012, according to the data of GoldPrice.
Bloomberg Intelligence team forecasts that gold is going to top the Carter-era highs compared to commodities. The Carter-Era is called the time period from 1977 to 1981 when Jim Carter served as the 39th US president. During the years of his presidency, the price of gold skyrocketed over 390% due to the rampant inflation and weak Dollar course. According to the report:
There is little to stop gold from extending its peak vs broad commodities from 40 years ago. Trends in the advancing metal and declining commodity prices appear entrenched, with added momentum from the coronavirus.
Why should gold’s price increase?
Furthermore, the leading banks of The United States forecast the surge in gold prices as well. Following their position, reported on Forbes, there are three main factors for possible gold price rally: the possible devaluation of the US dollar, the economic uncertainty, and the increasing demand.
Morgan Stanley’s Chief Investment Officer Lisa Shalett admitted that the US dollar currently may be approaching its peak. According to her, if it weakens, investors should consider adding gold to their portfolios.
Meanwhile, the global economy is still in the recovery phase after the coronavirus pandemic that has disrupted industries and logistics worldwide. Financial experts from Goldman Sachs claim that the demand for gold increases during the times of economic uncertainty:
Gold investment demand tends to grow into the early stage of the economic recovery, driven by continued debasement concerns and lower real rates.
Accordingly, JPMorgan expressed the position that gold should be considered as a hedge during uncertain economic times. As reported on Forbes, the bank predicts that “high unemployment rate, declining business productivity, and fear of a second wave of the pandemic could cause the economy to slump”.
Digital gold most likely to follow metal gold
Back to Bloomberg’s report, the world’s leading digital currency is in a rising correlation with the traditional gold as it is gaining buoyancy from the metal. According to analytics, the fact should positively impact the price of Bitcoin:
Increasing companionship with gold is a Bitcoin-price tailwind. [...] The first-born crypto should continue to advance for reasons similar to gold, fueled by unprecedented global central-bank easing.
Furthermore, the institutional interest in Bitcoin is rapidly increasing and bringing more maturity to the benchmark crypto asset.
The world’s biggest cryptocurrency manager Grayscale is intensively buying Bitcoins since its third halving this May. The firm has nearly 400.000 Bitcoins under its management, which makes up around 2.5% of Bitcoin’s total circulating supply which is 18.4 million at the time of writing.
The growing number of Bitcoin futures contracts also contribute a lot to the further maturing of the world’s benchmark cryptocurrency.