Damian Courvalin, Head of Energy Research at Goldman Sachs was interviewed on Bloomberg television on Friday and he had some bullish comments on gold.
He kicked off the interview by saying, Over the last six months, gold didn't really belong in any portfolio as growth was good. Now because of the risk of persistent inflation, the value of gold in a portfolio makes a lot more sense.
When asked what could happen to gold if interest rates rocket Courvalin said, "long-dated rates and real interest rates matter most for gold". He added, "if breakevens widen it is a tailwind for gold".
When it comes to the crypto vs gold debate Courvalin said "crypto and gold do not have to cannibalize each other" but he said, "it is a fact we have seen some substitution recently". He pointed out bitcoin has value in its network and gold like art has no value in that form but it can outperform other assets over a period of time. There is a theme to watch as China started to ban some crypto projects in the nation there was some increased gold demand in the country.
Courvalin then split up gold consumers into three sections, Central banks, investors, and EM consumers. He said what has been missing over the last 5 years is savings in gold. He said now this can recover pointing out the fact that countries like Russia have not been able to save as much in gold due to the lower oil price. Now the oil price has recovered and there could be excess wealth (in the form of savings) the central banks may now look to gold to store that value.
When it comes to the EM consumer, Courvalin noted "the evidence if India is showing us there is gold demand". He added, "it really appears that there is a bid on the jewelry side from China as the vaccination adoption continues".
On price zones, he said, "our base case for gold is $2k and one should be open to some future upside".
