Wealthy Investors are Expecting the Inflation Rate to Grow
Billionaire investor Sam Zell believes that inflation rates will keep increasing, so he’s bought gold as a hedging asset, as reported by BNN Bloomberg.
In an interview for Bloomberg, Zell said that buying gold was a non-standard decision for him: in the past, he didn’t see the point in holding an asset that doesn’t yield an interest and even incurs storage costs. But now, looking at how fiat currencies are depreciating, it’s become clear that one needs to hold a stable asset to safeguard one’s wealth.
The billionaire said that he’s not worried about the prospects of the US dollar; rather, he’s concerned about other countries, which keep printing unbacked fiat money. He also believes that inflation is going to speed up. Therefore, he considers his decision to purchase gold reasonable and justified. For example, Zell cited the growing prices for construction materials, as well as many supply chains that still haven’t recovered from the pandemic restrictions.
Meanwhile, Capital Economics experts believe that the recent increase in retail demand for gold will not prevent the price from going down to $1,600 an ounce by the end of the year. The analysts maintain their bearish outlook, even though gold is now testing the $1,800 level.
The strong growth in demand for physical gold has helped offset the outflow of capital from gold ETFs, whose shares are backed by physical gold. However, there is a big chance that the price will go down throughout the year.
According to Capital Economics, there are three main reasons why the price of gold should decrease by $200 by the end of 2021. The first is that the recovering demand is due to the temporary price slump. The second is that India’s increased gold imports are temporary, and the situation in the Indian market can shift at any moment. Thirdly, the US Treasury yields and the USD exchange rate will act as the key influence on the gold price this year, limiting the positive effect of the growing demand.
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