‘Global gold prices may double on weaker dollar’

International spot gold prices may touch $7,000 an ounce by 2030 in the event of a dollar devaluation, according to Anindya Banerjee, head of currency and commodities, Kotak Securities. This is twice the current price of about $3,400 an ounce.

“The United States is trying to morph from the world’s consumer of last resort into a net producer. That pivot requires a cheaper currency and smaller capital inflows—outcomes that are bullish for real assets and especially for gold,” said Mr. Banerjee. A cheaper dollar may be achieved even as an outcome of policies such as immigration control and tariffs, among others, to achieve a zero-trade deficit, he pointed out.

U.S. President Donald Trump, during a recent interaction with the American media, said “you make a hell of a lot more money with a weaker dollar. When you have a strong dollar, you can’t sell anything. It’s only good for inflation, and it’s good psychologically. It makes you feel good.” The American government is reportedly mooting the idea of devaluing the dollar to shore up exports and reduce the trade deficit. The immediate consequence of such a move would be a spike in international gold prices according to analysts. 

‘Unlikely’ move

An active devaluation might be unlikely because that might reduce dollar’s status as a reserve currency, said Maneesh Sharma, AVP of commodities and currencies, Anand Rathi Shares and Stock Brokers. He, however, said even without a planned devaluation, a cheaper dollar, which is the outcome of tariffs and trade controls, would invariably lead to a surge in gold prices.

“There could be a possibility that gold could now act as a hedge against inflation and also the safe-haven demand would come back probably in the last quarter of the year or the first half of the next year. So, that would propel gold to a new high in that period. We are looking at levels of about $3,800 to $3,850 per ounce in the international spot market,” said Mr. Sharma, adding a price of more than $4,000 an ounce could be a “very well achievable,” in the next one to  two years, considering an economic slowdown and inflation trajectory in the U.S. as an outcome of the tariff.

Gold is an asset that households and the investors flock to during times of uncertainties. In the past year, international spot gold has become 39.4% costlier from a monthly average of $2395.3 an ounce in July 31 2024, according to data from World Gold Council. A price of ₹3,800 by the next nine months would mean a 14% increase from current levels. 

The possibility of an active devaluation of the dollar has been written and spoken about by international commentators such as American hedge fund manager Ray Dalio. Companies in the U.S., too, are reportedly factoring-in cheaper dollar in earnings estimates.  In the Q2 earnings call of Netflix, CFO Spencer Neumann raised full-year revenue guidance, citing the effects of a “softer dollar.”

Experts, however warn a conscious devaluation of the dollar  would be more difficult and chaotic than expected.