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Why record-setting gold prices will fend off headwinds and see 30% more upside, according to famed economist David Rosenberg

While investors have been riding high on a record-breaking stock market, their favorite safe haven has also reached new peaks.

Gold prices reached a historic $2,328.7 per ounce last week, and one economist says the momentum could carry the yellow metal to $3,000 before the next business cycle shift — a 30% increase from current levels.

That’s according to famed economist David Rosenberg, the president of Rosenberg Research. He said in a recent note that the latest gold run is “especially impressive,” because it not only surpassed bitcoin and every major currency, but also overcame typical macro headwinds that often depress its value.

“The rise in the gold price has come at a time of dollar strength, falling inflation expectations, and during which the Fed has moved market expectations toward a ‘higher for longer’ conviction. All those developments would typically hurt the gold price, but it’s forged ahead regardless,” his team wrote in the note.

But before plunging into the hype around bullion’s future, it’s worth peeling back what’s behind the recent surge.

Strong demand
Rosenberg and his team said the major driver of the latest highs wasn’t so much on the supply side — which has been steady in recent years — but rather on the demand side, thanks to central banks’ reembrace of it as a reserve asset.

With the Chinese yuan losing its grip as the world’s second reserve currency, and as nations like Japan, Russia, Turkey, and Poland fear overreliance on US dollars, many have turned to gold for security as they weathered idiosyncratic economic risks.

“After divesting from gold in the early part of the century (physically backed reserves were oh so passé), central banks are once again building up their gold holdings, and at scale,” he said, adding that central banks bought 361 tonnes of gold in the third quarter of 2023, a turnaround from -77 tonnes in 2022’s same period.

Read full article /markets.businessinsider