Will all currencies become perceived as increasingly risky?
"Gold traded at $914.10 a troy ounce, moving between a low of $903.20 and a high of $916.65 after ending trading in New York at $905.40.
Goldman Sachs has raised its forecast for gold prices. Goldman said it now expected gold to reach $1,000 an ounce over the next three months, up from $700 previously, and has revised its 12-month forecast to $825 an ounce from $795 previously.
Goldman said recent strong demand for gold was not “irrational” but reflected the rising probabilities of a financial or sovereign default.
“In the recent financial environment, all currencies have become perceived as increasingly risky, with the recent US dollar rally being driven more by declining confidence in other currencies than by increasing confidence in the US dollar,” said Jeffrey Currie, commodity strategist at Goldman: “This has left gold as the currency of last resort.”
Goldman said the increasing role of gold as the currency of last resort could be seen in the increasing correlation between gold prices and measures of financial distress from the credit-default swap (CDS) markets."