Models suggest that gold should be trading at $2,200 an ounce right now, with the U.S. dollar overvalued by around 20%, according to BCA Research.
"The U.S. dollar used to be about 70% of global reserves in early 2000. Right now, it moved down to 60%. Gold's share increased from 6% in 2015 to 10%," Ntonifor said."The de-dollarization is not something imminent. The IMF data show transactions in U.S. dollars increasing around the world." Central bank gold buying has also offered strong support to higher trading levels, with last year's record-high levels spilling over into this year.
Another key driver for gold this year will be inflation data versus inflation expectations."There is a disconnect between what's actually happening to inflation and what the market is pricing in terms of where inflation is going to be," Ntonifor noted."And gold has decoupled from the market-based inflation measures. But inflation is still too high. And we know from history that one of the perfect attributes of gold has been to protect purchasing power.
U.S. Treasury Secretary Janet Yellen warned on Sunday that if the debt ceiling is not lifted, it could trigger a"constitutional crisis."