Goldman: US dollar can lose status of reserve currency

Goldman Sachs Group believes that the US dollar's position as the world's reserve currency is under threat as evidenced by the recent rise in gold prices, according to Bloomberg.

According to the Goldman's strategists, US dollar faces several risks, namely: the rate of the US Federal Reserve can shift towards an "inflationary bias", growing political uncertainty and growing fears associated with another surge in coronavirus infections in the country.

The accumulation of debt as a result of the pandemic could escalate fears.

The record gold rally reflects growing worries about the global economy. The bank raised its 12-month outlook for gold prices from USD 2 thousand to USD 2.3 thousand per ounce.

US dollar is falling amid renewed outlooks for the US dollar's depreciation following a historic deal made by the European Union countries that approved a coronavirus bailout package, spurring the euro's gains and leading to the first ever joint debt issue.

For Goldman Sachs, growing debt levels in the USA, which now exceed 80% of the country's gross domestic product, and in other countries raise the risk that central banks and governments could allow inflation to accelerate.

"As a result, inflated central bank balance sheets and a huge supply of money make it "more likely that sometime in the future, when the economic activity becomes normal, central banks and governments will be tempted to raise inflation to ease accumulated debt burdens," the Goldman's analysts say.

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