Gold’s rally to new highs is getting assistance from central banks buying and inflows into gold-focused exchange-traded funds. Along with optimism from forthcoming rate cuts, it could see the precious metal continue to see new highs.
Even when gold’s rally fizzled into sideways trading action in the summer, central bank buying has been one of the catalysts for keeping prices afloat. With geopolitical tensions elevating, central banks have been busy repatriating gold closer to home.
China, in particular, has been busy purchasing gold, according to data from Bullion Vault. China has been buying gold nonstop for an 18-month period prior to May 2024. Along with Russia, China has been a major purchaser since the IMF started tracking purchases since 2004.
“There has been this consistent solid base load demand from central banks,” said Chris Mancini, Gabelli Funds associate portfolio manager of the Gabelli Gold Fund, in a Yahoo Finance report.
The report also noted that demand for gold ETFs has been a major contributor to rising gold prices. However, the recent rise in gold prices has largely been driven by ETF purchases as interest rates have fallen.
“If rates continue to decline after this projected next one September, I think that we’ll continue to see inflows into the ETFs, and that will drive gold prices higher,” Mancini added.
$3,000 In Sight
With gold rallying to greater heights, analysts are wondering how much higher the precious metal can go. One market strategist can see gold pushing past the $3,000 price mark. The precious metal is already up over 23% for the year.
“The bottom line for gold is it typically outperforms the S&P 500 when it’s at a severe discount, which it is now when unemployment rises and the yield curve, which is steeply inverted, disinverts,” said Bloomberg Intelligence Senior Macro Strategist Mike McGlone. “So all the all the inklings for gold are quite strong upward, particularly if we start getting a little look back and feel in stock market, which would mean somewhat deflationary forces.”
If adding exposure to gold prices directly via bullion isn’t an option, another way to capitalize on the precious metal’s strength is via gold miners. In particular, investors should take a look at the Sprott Gold Miners ETF (SGDM ) and the Sprott Junior Gold Miners ETF (SGDJ ). The former adds broad diversification to gold mining companies of various market cap sizes, while the latter focuses on small cap growth.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
