Gold’s Meteoric Rise
GSC Commodity Intelligence has officially dubbed 2024 “The Year of The Metals.” And gold is proving them right. The precious metal is experiencing one of its best years in history. It is setting new all-time high records for the fourth consecutive quarter. This remarkable performance is fueling speculation that gold may soon reach the $3,000 per ounce milestone.1
Since October of last year, gold has been on a parabolic run. It surged from the $1,800 level to a new all-time high of $2,589, marking a nearly 44% increase. Gold has set back-to-back record highs on 33 separate occasions. The U.S. dollar’s weakening has further boosted gold’s ascent, providing strong tailwinds to this rally.2
In 2024 alone, gold has surged by an impressive 20%, outpacing the gains of the S&P 500. Even more striking is that gold has achieved this despite a net outflow of $2.5 billion. This indicates that investors have been taking profits – from what is usually considered a defensive asset.3
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Bank of America: Gold Outperforming Tech Stocks
Bank of America has observed that gold is outperforming tech stocks this year. B of A strategist Michael Hartnett recommends continuing to buy it. He told investors to “do what central banks are doing…buy gold.” Central banks have been on a buying spree, further boosting gold prices. Central bank purchases reached 14-year highs in 2022 and 2023.5
Harnett’s primary reason is the potential rebound of inflation due to forthcoming interest rate cuts. Historically, gold has been a strong performer during periods of inflation. It is an attractive asset for those seeking a hedge against rising prices.
The $3,000 Milestone in Sight
The $3,000 per ounce milestone for gold is now within reach due to interest rate cuts and election uncertainty. Gold recently reached another historic high. It hit $2,580 on September 16, just after breaking $2,572 on Friday the 13th.
Several financial institutions are weighing in on the outlook. Citi Research predicts that gold could hit $2,600 by the end of 2024 and $3,000 by mid-2025. Interest rate cuts, increased ETF demand, and over-the-counter physical demand will potentially fuel the surge. Australia’s Macquarie Investment Bank also projects gold reaching $2,600 by the first quarter of 2025. They see its potential to spike to $3,000 as well. 6
Interest Rate Cuts: A Catalyst for Gold
The Federal Reserve is considering its first interest rate cuts since 2020. Typically, low-interest rates make non-yielding assets like gold more attractive. If the Fed follows through with cuts, it is likely to be followed by additional rate reductions in November and December.
Economists are currently divided on the size of the next interest rate cut. They think it could be 25 or 50 basis points. The size of the cut could signal how the Federal Reserve views the current economic outlook. Generally, a larger cut suggests a weaker economy.
Zaner Metals noted that a weakening labor market could lead to a larger interest rate cut, accelerating gold’s rise to $3,000 an ounce.7
In either case, gold stands to do well if the Fed cuts gradually or it’s forced to lower rates more urgently in a recession. That’s according to Brien Lundin, editor of Gold Newsletter. “The lesson, in my view, is that gold has established itself as the all-weather hedge against whatever happens next,” he said.8
There is still room for interest rates to send gold higher. Joe Cavatoni is senior market strategist at the World Gold Council. He said the potential impact of rate cuts “isn’t fully accounted for yet.” And that investor demand will be around for a long time. 9
Political Uncertainty as a Key Driver
The upcoming November 5 presidential election adds another layer of uncertainty. And in turn, motivation for safe haven assets. Political unrest after the election could further spike gold prices. Ole Hansen is head of commodities strategy at Saxo Bank. He believes gold has long-term support. He suggests that “a disunited world loaded up on geopolitical risks and debt will continue to underpin prices.”10
Conclusion
Some analysts believe we may be witnessing the beginning of a “new historic supercycle for gold.” With uncertainty rising both economically and geopolitically, the demand for safe-haven assets like gold seems set to increase. Goldman Sachs expressed confidence in gold’s near-term upside, calling it the firm’s preferred hedge against risk.
Individuals looking to benefit from this potential rally can explore physical gold and silver, particularly through tax-advantaged Gold IRAs. Given the current economic environment, now may be the ideal time to consider adding gold to one’s portfolio. Contact us today at 800-462-0071 to learn more.
