Goldman Sachs: Views on the US Economy and Gold

Goldman Sachs (GS) Chief Operating Officer John Waldron believes that the US GDP growth rate could improve next year compared to what we’ve seen in 2019. A higher economic growth rate could be a bullish driver for the US equities.

This year, the S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the Nasdaq 100 Index (QQQ) have risen 25%, 19.5%, and 32%, respectively. Among most of the developed and major developing economies, US equities have outperformed.

US growth rates

According to a December 10 CNBC report, Waldron noted, “Certainly, in the United States in particular, the economy feels if anything like it might be accelerating again from what had been a little bit more of a patchy 2019.”

In the first three quarters of 2019, the US GDP annualized growth rate was lower than the same period in 2018. Notably, the GDP growth rate in Q4 2019 is expected to be lower than Q4 2018.

J.P. Morgan’s chief equity strategist, Dubravko Lakos-Buja, has similar views regarding the growth rate in the US economy. According to a December 9 CNBC report, he noted, “We expect the rotation from Momentum into Value to persist as the global business cycle re-accelerates and puts upward pressure on bond yields and commodities.” To learn more, please read S&P 500 Outlook: What Are J.P. Morgan’s Views?

USMCA

Congressional Democrats now seem amenable to the USMCA (United States–Mexico–Canada Agreement) after their suggestions were incorporated. The implementation of the USMCA could be President Trump’s next major achievement after the fiscal stimulus.

Experts believe that this bill could increase Trump’s re-election chances. For a detailed look at the critical factors contributing to Trump’s re-election campaign, please read Do Analysts See an Easy Win for Trump in 2020 Election?

The USMCA could boost overall employment in the US, based on the White House’s estimates. To learn more, please read Will the USMCA Lift Trump’s 2020 Reelection Chances? The USMCA could support Goldman Sachs’s expectations for a higher growth rate next year.

Goldman Sachs also sees an upside in gold

According to Goldman Sachs, gold futures could touch $1,600 per ounce in 2020. On Monday, CNBC reported that modern monetary theory (or MMT) could push gold prices higher. Yesterday, gold active futures settled at $1,462.60 per ounce.

Developed economies have seen growth in debt and fiscal deficits, but this economic situation has become a new normal in today’s world as described by MMT. Previously, developed economies have been quite cautious about rising debt and any expansion in their fiscal deficits.

These factors impact the value of a country’s currency. Notably, when a currency loses its value, investors move to gold. The rise in gold prices could originate from emerging economies. Phase one of the US-China trade deal has not materialized yet. If it takes a long time to get a signed deal following the preliminary talks, we could see further weakness in emerging economies.

In that case, emerging economies’ central banks could increase the purchase of gold, as we saw this year. This trend could be a driving force for gold prices. Previously, industry experts indicated a multiyear bull run for gold. The $2,000 price level for gold could be possible in the next few years. To learn more, please read Gold Prices: Is $2,000 on the Horizon?