Bloomberg Intelligence: Macroeconomic reset favors gold

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... Bloomberg Intelligence is projecting "a severe global economic reset," with gold set to be one of the top commodity assets this year.

"We see gold as the potential shining star this year," said Bloomberg Intelligence senior macro strategist Mike McGlone. "The Federal funds rate … [is] still rising [and] may represent the early days of what we see as a severe global economic reset. The enduring gold bull and crude-oil bear markets may be energizing."
... McGlone prefers to look at the relationship between gold and oil to get a more precise outlook. "Crude oil's high-velocity rally to the peak in 2022 may have solidified a foundation for gold. The metal appears to be bottoming from the steepest 24-month drawdown since 2015," McGlone said. "The 2022 price spike may have set the new standard, with implications for commodity deflation and gold buoyancy."

Since 2007, gold has gained about 130%, while WTI saw a decline of about 20%. And if WTI crude falls to $40, it would pave the way for gold to hit $3,000 an ounce.

John Paulson says essentially the same thing (macroeconomic reset) without saying it directly:
Gold will increase in value while the U.S. dollar drops, said Paulson & Co. founder John A. Paulson. And that is the hedge fund manager's outlook for this year, the next three years, and the next five years.

"There has been a significant increase in demand from central banks to replace dollars with gold, and we're just at the beginning of that trend. Gold will go up and the dollar will go down, so you'd be better off keeping your investment reserves in gold at this point," Paulson told journalist Alain Elkann in an interview.
Gold represents a legitimate alternative to the greenback and other fiat money. And with the growing fear of sanctions, countries like China recognize that USD reserves can be frozen.

"If you keep your money in fiat currencies, you face the risk, due to geopolitical events, that your reserves can be seized. As the central banks did with Russia. China probably thinks that as they have so much of their reserves in dollars, if they get into a geopolitical spat with the Western world over Taiwan or something else, there is a possibility these reserves will be frozen, like they did with Russia," Paulson pointed out.

With physical gold, there is no such risk, plus there is a very good likelihood that the precious metal reserves will go up in price, the billionaire noted.

"We're at the beginning of trends that are going to increase the demand for gold, and inflation and geopolitical tensions will determine the rate at which gold increases. This year gold will appreciate versus the dollar, and also over a three, five, and ten-year basis," he said.

In a report published late Wednesday, commodity analysts at BCA Research reaffirmed their bullish outlook for gold through 2023. ...
"The FOMC decision to raise interest rates should help convince markets of the US economy's health. However, the Fed is still stuck between risking an economic meltdown as a result of aggressive rate hikes, or runaway inflation due to inaction," the analysts said. "Gold prices will remain supported amidst heightened US economic policy uncertainty and the risk of elevated headline inflation."

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