Gold Breakout Around Corner? Dollar Decline, Stock Plunge to Drive Yellow Metal Past $3,000?

Gold prices jumped 15 percent in the last three months, indicating a further upward rally ahead, powered by a combination of macro-economic inputs. The next gold boom will be driven by factors like a further drop in the US dollar, a retreat in the stock markets and a potential commodity surge caused by China's opening up.

February gold futures ended the week at $1.927.10 an ounce, even as silver recorded a 21 percent jump in the last three months.

Gold Bars
Gold backed exchange-traded funds this year has already topped the record set in 2009 Pixabay

US Default Fears

Jonathan Rose, CEO of Genesis Gold Group, also said the prospect of the US federal government defaulting on its loans, albeit an unlikely scenario, will also drive the surge of gold. The US Treasury Department warned last week that the government could default on its interest payments by June unless extraordinary measures are taken before that.

"Anyone can see that government spending is a major problem for our country's economic health, and now our government is at risk of defaulting on its bills ... If the federal government defaults on its loans, it will destroy whatever investor faith might be left in the U.S. dollar and weaken it dramatically," he told FOX Business.

Major Factors

However, Rose underlined that the major factors would be the dollar's loss in values and inflation. "The primary driving force behind gains in the precious metals market are a devaluing US dollar, inflation, and other federal government monetary policies."

Gold Pixabay

Meanwhile, Yahoo Finance reported that the Kitco News survey showed that gold prices could break out in 2023 to hit a record $2,100 per ounce. The survey also silver could rise as much as 50 percent in the year.

Wild Prediction

Some weeks ago, analysts at Saxo Bank said gold could hit a whopping $3,000 in 2023. Although most analysts do not believe such a stratospheric rise is possible, Saxo analysts said the elevated levels of inflation in the foreseeable future is a potent factor.

According to them, the markets will finally discover that inflation is set 'to remain ablaze for the foreseeable future', while a full reopening in China will cause a huge jump in the demand for the commodity. "The yellow metal is said to be additionally supported by the rising global liquidity and "geopolitical backdrop of an increasing war economy mentality," they said.

End of Consolidation Period

Avi Gilburt of ElliottWaveTrader puts a more modest projection forward. According to him, gold is likely to zoom past $2,000. According to him the conditions are ripe for a gold rally after what he calls a two-year consolidation period that just got over. "Back in August of 2020, we hit the top of the third wave. From then, until we hit the low back in early November of this year, we basically had a two-year consolidation in a fourth wave. We are now preparing to rocket higher in a fifth wave," he said, according to Yahoo Finance.