LAWRIE WILLIAMS: Gold rising to $2,250, BTC falling to $5,000 - both next year!
We have over time been pretty positive about the prospects for the gold price – currently wavering just short of the $1,800 mark, but have tended to be negative on cryptocurrencies. Thus it is perhaps encouraging for us to come across a respected analyst from one of the world’s major banks who, if anything, is prepared to express even more extreme views than we are – particularly on the crypto element.
In this case it is analysis from Eric Robertsen, Global Head of Research for Standard Chartered Bank. He reckons that markets are underestimating a number of what he terms ‘surprise’ scenarios for 2023, the most significant of which is a continuing dive in cryptocurrencies with bitcoin (BTC), the leading crypto, falling to perhaps as low as $5,000 during 2023. BTC is, at the time of writing, priced at around $16,980 so this would represent a massive fall from its current level, not to mention from its recent high of almost $69,000 achieved in July 2021. He considers that the recent losses seen from the collapse of cryptocurrency exchange FTX could well be added to by continuing difficulties in the tech sector in general and more bankruptcies and contagion problems among crypto counters. We have always considered that crypto pricing has largely been built on hype and when this turns against the markets, declines can be rapid and far reaching as we have seen with FTX.
As for gold, Robertsen’s thoughts are not nearly so extreme and are much closer to our own likely pricing scenario. As cryptos collapse, Robertsen feels that investors who had viewed bitcoin and other cryptocurrencies as ‘digital gold’ would rapidly switch their investments into the real thing and thereby drive the gold price upwards to around $2,250 – a new record high for the yellow metal. This is a level which we feel is a more realistic price target for next year in any case, even without the boost from the money that might otherwise have gone into the crypto sector.
It does seem more and more likely as inflation continues to exert an adverse impact on global economies that the world is heading for recession, with the potential for it being both deep and prolonged. Energy and food prices remain at above average levels, in part as a result of the Russian invasion of Ukraine where conflict seems to show no sign of coming to an early conclusion. With high inflation continuing, economies are suffering and equity prices have to be vulnerable to price falls as consumer spending is squeezed and corporate profits are too as a consequence. Gold is likely to be one of the few assets that may remain relatively unaffected both as a store of wealth and an inflation hedge and while its day to day pricing may remain a little volatile its overall trend is likely to be positive taking it through the $2,000 level perhaps by the end of Q3 2023, particularly if Robertsen’s scenario plays out.