Goldman Sachs: Gold is a great hedge against political risk


Goldman Sachs Head of Commodities believes that Gold is a great hedge against political risk, even though there is an elections-related political turmoil. What is next for gold?

28 September, AtoZForex Gold issue on the table: gold prices slid to their lowest point in about a week on Tuesday. However, Jeff Currie, Goldman Sachs Head of Commodities believes that gold could be still a good commodity to hold in an environment of elections-related political turmoil.

Goldman Sachs: Gold is a great hedge against political risk

Goldman Sachs believes that gold will rally from its current level of about $1.330 an ounce to $1,280 an ounce by the end of the current year. This forecast stems from the company’s outlook on interest rates, Mr. Currie stated. Goldman Sachs believes in 65% chance of the Federal Reserve (Fed) raising rates at its December gathering.

Gold is non-interest paying and grapples to compete with commodities that bear a yield when the Fed raises the interest rates. Jeff Currie has commented:

“I always like to say gold is a great hedge against politicians, and we have a lot of political risk in the market right now. So gold has a strategic purpose.”

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He further explained the tie between politicians and gold, stating:

“Well, if you think about the correlation between rates and you think about when you debase a currency or weak dollar, what people gravitate to are hard assets and gold is the epitome of the hard asset.”

What is next for Gold?

Gold headed down on Wednesday, reaching one-week low on the stronger dollar. Bullion also slid on the first US presidential debate between Donald Trump and Hillary Clinton, which has increased the investor’s appetite for riskier assets.

Spot gold emerged 0.2 lower at $1,324.71 per ounce by 0430 GMT on Wednesday. US gold futures dropped 0.1 percent to $1,328.50 per ounce. Barnabas Gan, the analyst at OCBC Bank, has commented:

“Demand for gold as a safe haven has fallen, simply because Hillary has more or less trumped over Trump in the presidential debate. Falling gold prices suggest that market watchers look at Hillary as a safer bet than Trump.”

As markets declared Hillary a winner of the first Presidential debate, gold has a potential to move further down in the coming days, according to the MKS trader James Gardiner.

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