Gold prices have been soaring to new heights, reaching a historic $2,400 per ounce this year. Renowned economist David Rosenberg, President of Rosenberg Research, believes that the momentum could carry the precious metal to $3,000 before the next business cycle shift, marking a 30% increase from current levels.
Rosenberg attributes this surge to strong demand, particularly from central banks reembracing gold as a reserve asset. Central banks have been steadily increasing their gold holdings, with a notable turnaround from -77 tonnes in 2022’s third quarter to 361 tonnes in the same period of 2023. This trend is driven by a desire for security amidst geopolitical risks and a fear of overreliance on the US dollar, especially as the Chinese yuan loses its grip as the world’s second reserve currency.
Gold’s allure is also bolstered by rising industrial usage, particularly in the electronics sector, which is experiencing a boom due to the demand for AI-related models. Furthermore, the precious metal’s safe-haven status is reinforced by global geopolitical risks and unpredictable macroeconomic outlook, with the US debt-to-GDP ratio at 120% and the looming possibility of a fiscal crisis.
Rosenberg isn’t alone in his beliefs. Jonathan Rose, CEO of Genesis Gold Group, also sees $3,000 gold on the horizon.
“We look at precious metals as long-term hedges against tumultuous markets, but major gains obviously make them even more attractive,” Rose said. “It is extremely encouraging to see gold moving up now because it bodes well for our clients who get into physical precious metals soon.”
Genesis Gold Group specializes in rolling over or transferring retirement accounts into Genesis Gold IRAs backed by physical precious metals.
In both a “soft landing” and a typical bear market scenario, Rosenberg sees a 15% upside for gold, with a potential 30% increase in play as central banks begin to cut rates. He cites the historically negative correlation between gold prices and real interest rates, predicting that a decline in real interest rates would lead to a 10-15% increase in gold prices.
“If Bitcoin, an invisible man-made token, can reach $70,000 then what’s stopping gold, a limited precious resource with a proven track record, from surpassing $5000?” Rose asked.
Rosenberg appears to agree. In light of these factors, Rosenberg advises investors to include gold in their portfolios and overweight it, as the downside risks are well contained but the upside is significant.
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