• Hedge fund manager sees further upside potential in gold
• Paulson expects the US dollar to depreciate against other currencies
• Demand for gold is likely to increase
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Gold Price Development
Gold investors needed strong nerves last year. After hitting its current 52-week high of $2,049.85 in March 2022, the price of gold continued to decline into the fall. In September, gold hit its current 52-week low of $1,622.12. The precious metal lost around a fifth of its value in just over half a year.
Since then, the price of gold has recovered somewhat. At the beginning of February it temporarily climbed to more than 1,950 US dollars, but then fell back somewhat and is currently trading at 1,825 US dollars (as of February 22, 2023).
Gold attracts new investors
Hedge fund manager Paulson sees further upside potential in gold as the precious metal attracts new investors amid persistent inflation fears and renewed geopolitical tensions. “The dollar is still very dominant in terms of reserves and trade, but the post-WWII US economy isn’t quite the powerhouse it once was,” Paulson said in an interview with journalist Alain Elkann. “Other countries don’t want to rely on the dollar as much as they did in the past, and the US also has a huge deficit with the rest of the world in terms of trade and investment balances, which used to be very positive but are now very negative .” explains the hedge fund manager.
dollar weakness
This, along with the US Federal Reserve’s quantitative easing and the resulting inflation, pointed to a depreciation of the US dollar against other currencies in the medium and long term. “If you had dollars and 9% inflation, you lost 9% of your money this year; interest rates didn’t come close to making up for that loss,” Paulson said.
Investors and central banks around the world are therefore looking for an alternative reserve currency – and gold represents “a legitimate alternative” to the US dollar and other fiat currencies. […] increased significantly” – and this trend, according to Paulson, is just beginning. Therefore, Paulson predicts: “Gold will rise and the dollar will fall” and recommends that investors should “keep their investment reserves in gold at this time”.
Another advantage of gold
While investors could invest in currencies other than the US dollar, which Paulson says are likely to appreciate against the US dollar, each of these currencies has its own problems. In addition, in the face of geopolitical tensions, storing funds in fiat currencies carries the risk that reserves could be confiscated – as the example of Russia shows. “China probably thinks that since they have so many of their reserves in dollars, if they get into a geopolitical row with the western world over Taiwan or something else, there’s a chance those reserves will be frozen like they did with Russia.” , according to Paulson. With physical gold, however, this risk does not exist. According to the hedge fund manager, another advantage is that gold reserves have the potential to increase in value.
“We are at the beginning of trends that will increase demand for gold, and inflation and geopolitical tensions will drive the rate at which gold will rise. This year, gold will appreciate against the dollar and also through three, five, and ten years,” says Paulson.
Editorial office finanzen.net
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