Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2022

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

By Will Hubbard

In a tumultuous week for the equity and gold markets, gold fell from $1,831.80 per ounce the previous week to $1,786.60 per ounce as of January 28.

Despite last week’s decline, gold remains attractive longer term. Technical and fundamental tailwinds could bolster the price of the precious metal.

From a historical perspective, the price of gold tends to follow booms with periods of very low growth. Over the last decade, the price of the precious metal has experienced very little growth and is forming the base of a “cup and handle” pattern. As the baseline for the handle forms over the year, we could experience another strong bullish period for the commodity, as we did in the late 1970s and early 2000s.

From a fundamental perspective, monetary and fiscal policies are on a collision course. The ability of the Federal Reserve and other central banks to raise rates to combat inflation is being substantially stymied by rising government debt around the world.

Despite a lackluster 2021, Goldman Sachs is not giving up on the yellow metal, citing a price target of $2,150 by year-end. “Today, the global growth-inflation mix is markedly different. While there is not yet talk of recession, our economists forecast a material deceleration in U.S. growth, while the imminent prospect of a new hiking cycle is leading to a risk-off environment across long-duration asset classes.” The report added, “We estimated that if inflation were to structurally move to 4%, gold could hit $2,500/oz based on the historical gold inflation relationship. We also estimated that gold would get somewhere close to this level if U.S. gold ETFs would move back to their 2011 highs. Therefore, we think there is considerable upside potential in gold in a scenario where inflation increases significantly.”



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