Don’t let the current strength of the US dollar fool you, says Wells Fargo as the bank confirms that it is maintaining its stance of a weaker greenback for 2021. Its bearish view for the dollar is in contrast to its expectations for gold, which it has been bullish on for several months.
Even if the US dollar does strengthen against its expectations, the bank remains positive that gold prices will remain buoyant, underlining once again the value of adding the precious metal to any investment portfolio.
Speaking earlier this week, the bank’s head of real asset strategy, John LaForge said, “We believe that commodities still have upside, and the U.S. dollar (USD) still has a downside. Should we be wrong on the USD, the commodity rally may slow some, but we still think that it survives. We are still commodity bullish and USD bearish.
“We believe …commodities can survive USD strength. While the negative connection between commodities and the USD has been strong lately, this historically hasn’t always been the case. Commodities are also influenced by other factors (improved Chinese economic growth, low global real interest rates, healing commodity super-cycle), which are generally commodity-positive today.”
The bank doubles down on its support for gold in its overall outlook for the year. The overwhelmingly pro sentiment for the precious metal comes as it says that the “fundamental backdrop continues to be attractive” which means we can expect prices to rise during the course of 2021. The bank’s own price prediction is for a new record high to be set. It says that by December, we should see prices running around £1,519 – £1,593 ($2,100-$2,200).
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