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Gold: Set to fall further despite improving inflation outlook – Morgan Stanley

Morgan Stanley's Chief Cross-Asset Strategist Andrew Sheets predicts gold to fall further from the current levels even though inflation is set to rise in 2021.

Key quotes (via Kitco News)

“Morgan Stanley's economists forecast US inflation to rise a little over 2% over the next two years. So, this is hardly the runaway type of scenario for inflation that gold would seem best suited for.”.

“Gold is an asset where the narrative matters. In 2021, the pandemic looks set to get better. Economic data is improving. Politics have become calmer. And interest rates are starting to rise.”

“Gold scores poorly on the more quantitative, cross-asset approaches that my team runs. The yield on gold is low, especially relative to other commodities. Its valuation isn't particularly attractive. The price momentum is poor, which is to say that commodities that are falling often tend to keep falling. And current economic data, which is improving, has often meant gold underperforms other assets.”

“As for gold, we forecast a price a little under $1,800/oz. by year-end; implying further declines from current levels even as inflation rises.”

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Author

Dhwani Mehta

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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