Subadra Rajappa, a strategist at the French lender Societe Generale, believes that the US dollar (USD) has lost its luster as a safe-haven asset.
In a new CNBC Television interview, Rajappa says that gold’s latest surge to record highs as the dollar continues to weaken indicates investors are turning to the precious metal as their preferred store-of-value asset.
Says Rajappa,
“The rise in gold versus the dollar not doing as much is telling. Your flight-to-safety asset is now gold. It’s not the dollar. It’s not really any other asset in the US.
Yes, you are seeing a run-up in equities. A lot of that has to do with the dollar weakening. The question becomes, what happens from here on? And gold seems to be that safe haven asset.”
Societe Generale is the world’s 19th largest bank with $1.717 trillion worth of assets on its balance sheet.
Meanwhile, banking giant Goldman Sachs believes that gold may hit $5,000 per ounce next year if the Federal Reserve’s independence is damaged.
Says Goldman Sachs analyst Samantha Dart,
“Should private investors diversify more heavily into gold, we see potential upside to gold prices to well above our $4,000 mid-2026 baseline. As a result, gold remains our highest-conviction long recommendation.”
Dart notes how a relatively small shift from one investment class into the precious metal would likely be enough to increase gold by about 36% its current value.
“For example, we estimate that if 1% of the privately owned US treasury market were to flow into gold, the gold price would rise to nearly $5,000/oz, assuming everything else constant.”
According to JPMorgan Chase, gold is also becoming widely favored over the dollar among central banks, increasing the risk of de-dollarization, a reduction of dependence on the USD for global trade.
Meera Chandan, co-head of Global FX Strategy at JPMorgan, said in July that the share of USD has dropped to below 60% at central banks, a two-decade low.
Gold is trading for around $3,659 at time of writing, up about $1,000 since January 1st.
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