People wedded to stock prices may want to look again. The price of gold has bested the S&P 500 for the past year. Gold is up 24%, while the S&P 500 is 18% higher.
The Bull Case for Gold
Gold trades at $2,060 an ounce. That is near its all-time high. Some analysts believe it could rise another 50% in the medium term. Mark Newton, head of technical strategy at Fundstrat, recently wrote, “My technical target for gold is $2500/oz, and it looks appealing to be long precious metals given falling real rates, rising cycles and ongoing geopolitical conflict,” according to Yahoo! Finance. Other analysts have forecasts of prices as high as $3,000.
Gold has been a hedge against runaway inflation and high interest rates for two years. That hedge value is nearly gone as inflation has come down. However, gold is also a hedge against global military and political instability. The current conflict in the Middle East has made it, at least temporarily, more attractive. (See which countries are buying up the world’s gold.)
Several things could boost the price of gold in 2024. Many economists believe that the drop in inflation is only temporary. Others say inflation continues to linger for consumers. The prices of mortgages are high. This is also true for many foods. Inflation has not gone away; it is just hidden because government-issued inflation rates are not a good yardstick for the cost of living.
Some see gold as a hedge against a decline in the stock market. As the markets hit all-time highs, it will only take a modest slowing of earnings to trigger a correction. Just look at the huge market reset downward in 2020, gold price advocates point out. Market corrections run in a cycle. Even if the current bull market continues, the market could drop 10% to 15% before another march upward.
Finally, the unsettled situations in Ukraine and the Middle East could worsen. This could cause damage to several asset classes. Gold is a haven. “Periodically, geopolitical risks and a flight to safety drive up the demand for gold. Recently, the Israel-Hamas conflict has driven up the geopolitical premium in gold,” Nitesh Shah, head of commodities and macroeconomic research at WisdomTree, told CBS News.
The bull case for gold to top its all-time high is compelling.
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