Gold, historically hitting consecutive all-time highs! Related stocks, including 'bagger stocks' with share prices doubling since the beginning of the year! Can you still win by buying in at this point?
How astonishing is the recent surge in gold? The modern-day "Gold Rush" is accelerating, with gold prices hitting new highs almost every week. This week, the spot price of gold surpassed $2,750 per ounce for the first time, expanding the year-to-date increase.33%
despite the sharp rise of the US Dollar Index since October, and the fading market expectations for interest rate cuts, gold prices have continued to hit new highs. SprottAssetManagement, an asset management company, mentioned that after gold prices reached record highs,Stated that they are entering a "new upward phase."Many financial institutions have mentioned thatThere is a possibility for the gold price to surpass $3,000.Also pointing out that.
This year, gold has undoubtedly emerged as one of the prominent global asset classes, following $Bitcoin (BTC.CC)$a remarkable 33% increase since the beginning of the year, surpassing $Nasdaq Composite Index (.IXIC.US)$and $S&P 500 Index (.SPX.US)$.
What to note is that in recent years, the performance of gold mining stocks has been lackluster due to the rising mining costs and the impact of high interest rates. However,Decrease in energy mining costsandRising gold pricesWith the leverage effect of management accompanying the increase in gold pricescould be the driving force behind gold mining stocks surpassing gold prices in a bullish gold marketFurthermore, the rise in gold prices couldIncreased cash flowand thatsuch as dividends and share buybacks for shareholder returnsoracceleration of debt repaymentis also seen to lead to.
In the gold sector of the US stock market, many gold mining companies with a market capitalization of over 5 billion dollars have seen year-to-date gains exceeding 33% of the gold spot price. Especially, $Kinross Gold (KGC.US)$and $AngloGold Ashanti (AU.US)$Year-to-dateRisen by more than 70%and $Harmony Gold Mining (HMY.US)$Has shown a doubling of stock price (as of the 23rd).
Demand as a safe assetandPolitical uncertainty in the USAin addition to,Strong purchases by the central bankandExpectations of a rate cut by the Federal Reserve、Rising US debtare also contributing factors to this increase.
* Gold is influenced by geopolitical and economic factors.Hedging instruments against uncertainty are considered beneficial, with interest rate declines typically favorable for non-interest bearing gold.And,interest rate declines are usually advantageous for interest-free gold.It is considered that value stocks are now one of the main factors for the consecutive rise and new record high of Berkshire Hathaway shares.
● The expansion of the US fiscal deficit enhances the appeal of gold.
From a fiscal perspective, according to Michael Hartnett, Chief Strategist at Bank of America, while the annual budget spending of the US government in 2019 was only about 4.5 trillion dollars, it has now reached about 6.9 trillion dollars.
On the other hand, the federal government's debt in the USA has surpassed the $35 trillion mark. This has led toUS Treasury bonds remaining in a structurally bearish market.There is a clear reason for this.Both presidential candidates are not planning or hoping to achieve fiscal balance, so the slump in US bonds is expected to continue.It is considered.
Michael Widmer of Bank of America Corp also expressed a similar view. Historically, the rise in US bond yields has meant a decrease in the price of gold. This is because investors seek other sources of income. However, Widmer states,The real yield (inflation-adjusted) of 10-year US bonds is no longer correlated with the price of gold.and pointed out.
"Currently, the decline in real yield of US 10-year bonds is positive for gold, but the rise in yield is not necessarily negative for gold. This is due to heightened concerns about government debt levels. Particularly, as the US presidential election draws near, fiscal reconstruction is not being given much importance."
Over the next few years as the US budget deficit expands, Widmer views gold as "highly attractive." He further added, "If there are many concerns about the US bond market, gold is almost an ideal safe asset."
With increasing debt, governments may increase currency printing to eliminate deficits. This could lead to a decrease in the value of the currency, increasing the appeal of gold as a reliable store of value. "Facing inflationary pressure and uncertain macroeconomic environment, central banks and investors may allocate more funds to precious metals," said Paul Wong, Market Strategist at Sprott Asset Management.
• Long-term stability of gold prices supported by central bank demand
According to the World Gold Council, the net gold purchases by central banks in the first half of 2024 reached 483 tons, a 5% increase from the same period last year. Furthermore, a survey conducted by the same council in April this year found that 29% of the responding central banks intend to increase their gold reserves within the next 12 months.
Moreover, the latest report from the World Gold Council indicates that net inflows into physical gold-backed gold ETFs were recorded for the fifth consecutive month in September globally, increasing total holdings to 3,200 tons. This trend underscores strong investor interest in gold.
Mohamed El-Erian, Chief Economic Advisor at Allianz, points out that continued gold purchases by foreign central banks are a significant factor driving the rise in gold prices. While the market sees the U.S. as the 'economic exception', such purchases seem to be related to many countries' desire to diversify their foreign reserves and move away from the dominance of the dollar. Countries and companies outside the U.S. have been exploring potential alternative means in addition to the dollar-based settlement system that has been at the core of the international financial system for about 80 years.
• Gold is currently still in an underweight position
Furthermore, UBS states that gold is currently still in an underweight position, with potential for further increases in allocations to gold by investors.Allocation to gold by investors may increase further.It is stated. This will likely be the main driving force for price increases in the next 12 months.
Despite the significant rise in gold prices, there is still room for further upside in the gold market. In the current environment of accommodative monetary policies not only by the US Federal Reserve but also by other central banks, investor interest in holding gold as a diversification of portfolio remains high. Geopolitical risks and the uncertainty of the US presidential election further increase the likelihood of investors increasing their holdings.
While short-term speculative positions are increasing, according to indicators, positions in the broader market are still relatively low, and the estimated allocation to gold remains at an average of only 1-3%. This suggests that there is still room for further upside.
So, has the price of gold already reached its peak? Or is it in a bubble like in the early 1980s, with a significant correction looming ahead?
At the moment, gold prices are very high. In particular, as the US presidential election reaches its final stages and the situation remains tense, it is seen as difficult for the gold market to experience a significant decline until the results are announced.
On the other hand, many analysts are predicting further increases in gold prices, $3,000 per ounce.に達すると見込んでいる。一部の専門家は、金価格が今後3カ月以内に2,800ドルを突破する可能性があると予測。
・バンク・オブ・アメリカのコモディティストラテジストであるMichael Widmer氏は、今後の金価格には相当な上昇余地があるとし、「今がかつてないほどよい」と述べた。Widmer氏によれば、政府債務の増加や地政学的な不確実性の高まりが、金価格の見通しを楽観視する主要な要因となっている。
・シティ・リサーチは月曜日のレポートで、米国の労働市場のさらなる悪化、FRBの利下げ、および現物とETFの購入増加を理由に、金価格の3ヶ月先見通しを引き上げた。 3カ月間の金価格予想を従来の2,700ドルから2,800ドルに上方修正し、6カ月から12カ月の予測を3,000ドルとしている。
For investors who have not entered the market yet, is it too late to buy gold now? Global X investment analyst Trevor Yates believes that it is not too late to buy gold now.The two main factors supporting the rise in gold prices are strong physical demand and demand in the financial markets. uncomfortably close.
In the physical market, central bank gold purchases hit a record high in 2022 and the second highest in 2023, with this demand trend expected to continue until 2024. In the financial markets, the lowering of real interest rates by major central banks like the Federal Reserve Board (FRB) has been factored into gold prices.
Yates believes that there is a high possibility of further decrease in real interest rates, and the gold market is factoring in the increased likelihood of a more stagflationary environment, historically showing strong performance in such conditions.
Brien Lundin, editor of the Gold Newsletter, isWestern investors are lagging behind in entering the gold market.and pointed out.The initial driving force of this bullish market isCentral banksandinflows of funds from AsiaIt is said that, "However, it is easy for Western investors to understand the change in the Fed's policy and the overall shift of central banks around the world from rate hikes to rate cuts, and they can make big bets."
Based on these circumstances, many analysts believe that it is not too late to start investing in gold now, and they point out that there are various investment options available.
ETFs closely linked to the gold market often show a direct correlation with the price of gold, making it easy for investors to evaluate. This year, $VanEck Gold Miners Equity ETF (GDX.US)$are recorded a 42% increase.and surpassed the gold's 33% increase. Other major gold etfs include, $SPDR Gold ETF (GLD.US)$、 $Gold Trust Ishares (IAU.US)$、 $Spdr Gold Minishares Trust (GLDM.US)$、 $Abrdn Gold ETF Trust (SGOL.US)$、 $ISHARES GOLD TRUST MICRO (IAUM.US)$、 $VanEck Merk Gold ETF (OUNZ.US)$ ada ada.
In addition,Gold miningExpectations are rising for gold mining stocks to finally shine in terms of returns. While gold mining stocks have been languishing for years, they are currently outperforming other assets. Some gold mining stocks may have the potential to rise rapidly, more so than the price of gold itself.
However, what is important isthere is a significant difference in the ability of mining companies to profit from the rise in gold prices.In general, companies with high-quality mines have lower production costs and can extract more gold per ton of ore, allowing them to operate more efficiently. As a result, when the price of gold rises, profit margins often increase.Furthermore, geographical location and political environment are also important. Depending on the mining region, they may offer more favorable conditions on the regulatory and operational fronts, enhancing the stability and growth prospects of the mines.
When investing in these companies, the risk lies in the fact that not all gold mining stocks are purely gold-related investments, making it difficult to assess to what extent they benefit from rising gold prices. When selecting gold mining stocks, investors should pay attention to factors such as the proportion of income from the gold sector, debt repayment ability, growth performance, dividend yield, etc.
Source: Wall Street Journal, Bloomberg, moomoo
This article uses automatic translation in part.
moomoo news of individual stocks Sherry
This article uses automatic translation in part.
moomoo news of individual stocks Sherry
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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