5 Flashpoints for Gold
5 Flashpoints for Gold
Discover the five flashpoints for gold to pay attention to right now...
“What is really amazing, and frustrating, is mankind’s habit of refusing to see the obvious and inevitable until it is there, and then muttering about unforeseen catastrophes.” – Isaac Asimov
During my career on Wall Street, I saw that the best analysts were the ones who understood emerging risks, acknowledged their complexities, and were primed in advance to navigate them.
For investors, that means avoiding volatility when possible and being patient. For businesses, it could mean understanding external impacts ranging from supply chain disruptions to new tariffs. For those on Main Street, it means being on the lookout for economic problems and preparing for a rainy day.
As we near the start of Q4, we’re focused on gold. Last week, gold hit another record high on the back of the Federal Reserve’s interest rate cut. So far this year, gold has outperformed the S&P 500. But there’s much more to come for the yellow metal.
Below are five flashpoints, or what we’re identifying as pulsepoints for gold as we round out 2024.
1 – The U.S. Election
The current uncertainty surrounding the outcome of the U.S. presidential election will impact the markets, trading, geopolitics and gold. To be clear, regardless of who wins, the result will likely lead to increased debt and an expanded deficit. That will decrease the value of long-term U.S. Treasury debt which has historically had a positive impact on gold.
It is unlikely that either candidate will implement sweeping fiscal austerity measures or detailed economic growth plans. Both of those factors increase the odds that inflationary pressures, while not growing, will remain sticky – providing a positive post-election lift for gold.
2 – Central Banks
In a decisive move, the Fed cut interest rates by half a point. While rate cuts were expected, the decision to have a half point instead of a quarter point cut is both noteworthy and could be reason for some concern. It signals that economic and labor data, as we shared here, was concerning enough for Fed leadership to move aggressively.
Whether the U.S. is entering a period of economic slowdown or a true recession, the Fed’s decision and the accommodative direction of its monetary policy will play a crucial role in what’s next for gold. Next, we could begin to see other central banks that had waxed accommodative before the Fed cut ramp up their next cuts.
A lower interest rate environment is a bullish lever for gold because it means investors consider zero-interest bearing securities with greater upside in contrast to interest bearing ones.
3 – Generative Artificial Intelligence (AI)
This year, we’ve seen an acute shift from the development phase of AI into the implementation phase. However, if the latest news from Apple tells us anything, it’s that this phase will be filled with greater uncertainty.
Why? Because Apple launched its 16th iPhone based on Apple Intelligence while offering the promise of future AI updates to come at some point in the future. The iPhone usage has the largest smartphone market share in the world. Yet even this goliath is showings signs of weakness. But it’s not just Apple. AI giant, Nvidia is showing similar shifts in conviction.
Citadel, the world’s most successful hedge fund, exited 500,000 shares it had in Nvidia. Paul Singer’s Elliott Management recently said AI was “overhyped.”
To be clear, we don’t underscore these trends to imply AI won’t be revolutionary and isn’t growing – it is. However, these signs could indicate the market is overleveraged into only a handful of promising companies within the AI space. Money and investors can be fickle. Gold can offer a stable hedge when speculating on AI’s momentum while providing currency diversification value.
4 – Geopolitical Tensions
This year has seen no major global conflict come to an end. Ongoing wars from Ukraine to the Middle East along with increasing tensions in the South China Sea will keep the world and its supply chains on edge.
As my book, Permanent Distortion warned back in 2022, “black swan” events are sprouting around the world. And if the COVID crisis taught us anything, it’s that the world is highly interconnected. Whether through supply chains, trade, tourism, global health or finance – our planet is one of intricate connections and co-dependencies. Geopolitics matter.
As we round out 2024, geopolitical tensions will affect markets and economies. In a volatile global environment, gold, can and has served as a geo-political and national policy hedge. As we wrote, gold will play a key role in the ongoing posturing between the U.S. and China.
5 – De-Dollarization
Countries worldwide are seeking to diversify trade away from the U.S. dollar for economic and political reasons. This won’t change and will only grow. Last year, China and Brazil finalized an agreement that they would trade in their respective local currencies. Members of the Association of Southeast Asian Nations (ASEAN) also expressed the need to no longer rely on the U.S. currency for their regional trade.
This matters because it shows a slow but fundamental global shift away from the dollar that will continue throughout the end of this year. That means that its perceived currency value, over the long term, will be negatively impacted.
The Q-4 2024 Gold Outlook
This quarter, much like this year, will come with real challenges. We’ve seen that gold has weathered recent instability and is shining brightly now. Its story is steeped in history and magnified by global change, as it heads to a new precipice. This is why I forecast gold to hit $3,000 after the US. election and $4000 by the end of 2025.
For those who want to go a step further with this trend, in this month’s issue of Prinsights Premium we are highlighting two crucial companies on the cutting edge of the gold trend.
As Premium readers will learn, based on exclusive details shared with us by a leading CEO and a long-standing precious metals innovator, there is a new emerging factor in the gold space that you should be paying attention to now.