With gold knocking on the door of $1400, Goldman Sachs has set a new target on the yellow metal: $1650, according to MarketWatch.
David Goldman (no relation to the firm) explains:
China and Japan, the dominant regional economies and the biggest dollar holders, hate each other much more than either of them hates us. We are getting away with the monetary-policy equivalent of murder by resting on the laurels of our victories in World War II and the Cold War. We don’t do so forever, though, which is why gold represents a hedge against the eventual end of the dollar’s reserve role. It sells at twice the cost of production of the biggest gold miners. It’s not an ordinary commodity. It’s more like an option. And as the textbook will tell you, if you read the fine print, the price of an option when the probability distribution of possible outcomes is unknown is arbitrarily high.
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