Goldman Sash Group Inc. issued a warning yesterday highlighting a growing concern over inflation in the US, saying the dollar was in danger of losing its position as the world’s reserve currency.
The Federal Reserve has slashed its balance sheet to nearly $ 2.8 trillion this year with Congress closing the economy devastated by the pandemic in another round of racial stigma. Goldman strategists warn that US policy is triggering a “debasement fair”, which could end the dollar rule in the global foreign exchange markets.
However, this situation is still the minority in most financial circles and Goldman analysts say they do not believe it will necessarily happen. Investors were concerned that the printing of this money would lead to inflation in the coming years and gold could gain against the dollar.
Goldman strategists, including Jeffrey Curry, wrote “Gold is the last currency as the last resort. Especially when in the current environment where governments are destroying their fiat currency and pushing real interest rates up. As a reserve currency The US Dollar’s real concern as to longevity. “
Precious metals have fallen due to the fall in real interest rates
Goldman’s report makes it clear that Wall Street’s initial Reluctance is to return to inflation when the epidemic is beginning. After the 2008 Financial Crisis, the forecast of price gains after the racial and Monetary statement was proved badly wrong. In such a situation, many analysts are now hesitant to repeat such calls, especially at a time when the economy has sunk into a deep recession.
However, due to the record height of gold, investors’ expectations have increased and the debate has gained momentum on its sustainable effect. The 10-year short-term rate, the difference between nominal and inflation-linked debt, has increased to 1.51%, down from 0.47% in March.
Pressure on inflationary expectations is expected that the Fed will soon guide policy rates to link prices. This would give inflation at least some temporary space above the 2% target of the central bank.
Goldman’s analyst wrote, “The resulting extended balance sheet and huge money creation debasement are anticipated.” “After economic activities return to normal, for some time in the future, there will be an incentive for central banks and governments to allow inflation to flow more to reduce the accumulated debt load,” he said.
Gold’s record-breaking highlights the growing concern over the global economy. Goldman raised gold from $ 2000 an ounce to $ 2300 an ounce in its 12-month forecast. It currently costs around $ 1950 per ounce. US banks are lowering real interest rates, causing gold to jump.
The dollar will be strengthened by investors’ closing profits For Goldman, a rising level of debt in the US that now exceeds 80% of the nation’s gross domestic product, and the central bank and government increase the risk of inflationary movements. Edward Moya, a senior market analyst at Onda Corp, said in a note, “Unless we meet through the Federal Reserve, the dollar may be strengthened by investors’ closing profits.