Gold: spot prices are approaching $4000oz with some warning of a major top. Gold has been among the top performing assets classes this year, as have silver and platinum. Returning to Ed Yardeni, he wrote on Monday that gold’s record breaking rally could last through the rest of this decade, and “ultimately pushing the precious metal to $10,000oz”. I concur with Ed Yardeni that the bull market cycle in precious metals has much further to run in terms of where the US dollar is likely headed. This points to the bull cycle in PGMs have much more to run in terms of time.
Mr Yardeni’s price target implies the price of gold rising 151% over the next five years – which he believes will outperform the S&P500 where he holds a 10,000 price target underpinning a +50% increase. We saw a similar dynamic playout in the last commodity bull market when gold ran higher from $250 in 2000 to a peak above $1800 over close to 12 years.
Underpinning Yardeni’s bullish gold forecast are several factors. Economic and geopolitical forces have shaken up the status quo in recent years, “causing investors to flock to safe-haven assets like gold.” This includes the narrative around DJT’s tariffs, attempts to undermine Fed independence and lower interest rates, and China’s housing woes pushing Chinese consumers into gold.
He is also an advocate of central bank buying continuing “Our bullishness is supported by the ‘Gold Put,’ provided by central banks that are increasing the percentage of their international reserves in gold. “Gold looks on track to shatter the $10,000 mark if it keeps up its current pace. So far, so good. Gold already looked to be within “shouting distance” of our year-end price target of $4,000 an ounce for 2025.”
I agree with all Ed Yardeni’s points and have often expounded the same narrative. I would also add that a bear market underway in the US dollar – which has yet only really begun – could have much further to go where gold will be seen as the ultimate hedge. Central banks have been aggressive gold buyers in recent years, one of the factors supporting bullion’s latest leg up. And according to the latest update from the World Gold Council, central banks around the world added a net 15 metric tons of gold to their reserves in August. Kazakhstan, Bulgaria, and El Salvador ranked as the largest buyers that month. The key point here is that most developed economies are not buying gold yet – but this could change next year – particularly if the US dollar and the global bond market comes under renewed pressure.
Individual and institutional investors have also shown high interest in gold as a safe haven this year, but I would expect these flows to also accelerate given still low global positioning.
Carpe Diem
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