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Commerzbank Sees Higher Gold Prices

Last week’s New Orleans Investment Conference featured several speakers who predicted $3,000 to $5,000 gold prices within the next few Commerzbank Sees Higher Gold Pricesyears, but that would normally be expected in a gold-oriented conference. We’re more impressed when mainstream banks and investment advisors predict much higher gold prices. We’ve mentioned Bank of America and Goldman Sachs in recent months, but Germany’s Commerzbank was one of the first major banks to predict higher gold prices – several years ago.

 

According to a new Commerzbank report released last week, analyst Daniel Briesemann wrote that gold, “is finding support from the steep rises in new coronavirus cases, which are fueling concerns among market participants.” He also cited the forthcoming stimulus package and the “hard” Brexit separation of Britain from the European Union (EU), which seems finally ready to reach fruition, more than four years after the June 2016 vote. “The next weeks will show whether the two sides are able to meet one another halfway and avoid more substantial damage. Gold should profit from this uncertainty,” Briesemann said.

Briesemann continued, “We believe that gold is well-supported and expect the next few weeks to bring a renewed and lasting upswing rather than any noticeable correction.” Specifically, Commerzbank sees a likelihood of gold returning back above $2,000, especially if Biden wins. “Speculation has emerged that Joe Biden and the Democrats might set in motion a stimulus package worth $5 trillion if Biden were to become the next U.S. president and the Democrats were to win a majority in the Senate (they already have a majority in the House of Representatives). This would lead to another steep rise in the national debt.”

The Fed has added $3 trillion to its balance sheet (a 75% increase) so far this year, and the price of gold has been positively correlated to the expansion of the Federal Reserve’s assets. The fall of the dollar is also correlated to the fast pace of the Fed’s monetary increase vs. the European Central Bank’s monetary growth this year (+47%) and the Bank of Japan (+25%), causing the dollar to fall to the euro and yen.

Frank Holmes, CEO of U.S. Global Investors, sees gold reaching $4,000. “In the next three years, if we look back, if [history] repeats itself, from 2008, 2009 to 2011, that three year run saw gold go from a $750 - $800 range up to $1,900. If we forecast that because we have the same expansion of the balance sheet of the Fed, then it would project, if cycles are exactly the same, gold could go to $4,000,” Holmes said.

He said that the Fed’s balance sheet is now about 33% of GDP vs. 6% of GDP when Alan Greenspan was Fed Chairman. He also said that the debt expansion and recession this year are “going to cost the U.S. government approximately $10 trillion in fiscal and monetary policy to get the economy back” vs. about $2 trillion after the 2008-09 crisis. “This is unprecedented,” he said, “so, I think hard assets trade higher.”  BUY GOLD NOW!!!

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