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Wednesday August 24, 2022
The U.S. dollar has
been the main culprit holding gold back this summer, but Wells Fargo still
projects the precious metal to end the year above $2,000 an ounce.
Despite this week's gains, gold is still trading below $1,800 an ounce as
markets await Federal Reserve Chair Jerome Powell's keynote speech at the
Jackson Hole symposium on Friday. At the time of writing, spot gold was
trading just above the $1,752 an ounce level, up 0.22% on the day.
If not for the U.S.
dollar index at 20-year highs, gold would be around $150 higher than its
current trading levels, Wells Fargo's real asset strategy head John LaForge
told Kitco News.
"I'm still
shocked that gold doesn't want to move. The U.S. dollar is what's
holding gold back (Watchman
comment (wc): yeah, sure buddy, can you spell RIGGED? We aren’t members of
the club – George Carlin). Gold would have been closer to $1,900 if
not for the move in the dollar," LaForge said on Wednesday. "Gold
is still that chameleon asset. For six months, it's moving with real rates.
And just when you figured that out, it's moving with the dollar. And just
when you figure that out, it's moving with some crisis. For something so
muted, it's amazing how often it switches teams."
Wells Fargo's year-end
target remains $2,000- $2,100 an ounce, but if the U.S. dollar keeps
surprising on the upside, that target could be unachievable. (wc, there is always some excuse
to keep the price the price of Gold down.)
Over the summer of 2022, the dollar has become the popular safe-haven play
as other economies struggle with more problematic inflation and growth
concerns. And the U.S. dollar could hold on to its strength for the next
six months, according to LaForge.
"Our base case is that the U.S. will enter a recession somewhere in
October or November, which will last until the middle of next year.
Typically the dollar loses strength when signals say we are coming out of
recession. So, if our base case is correct, you could see the dollar start
acting weaker in Q1 of next year in anticipation of that," he
described.
For gold, a recession doesn't necessarily mean a bad thing. But it all
depends on the kind of recession the U.S. will see. A mild one could be
beneficial for the gold price, LaForge noted.
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