CA - Gold: The Long-Term Trend Is Up But The Real Opportunity Now Is In Miners
2024-04-08 21:41:31 ET
Summary
- The recent rally in gold prices is not the result of increased gold ETF flows, contrary to previous rallies.
- The new marginal buyers of gold are central banks and retail customers, especially from emerging countries.
- Gold has found a renewed role in the world monetary system, offering an important form of reserve diversification to central banks.
- Gold could play an even larger role in the emerging multipolar world, as collateral to facilitate transactions outside the SWIFT system.
- While a retracement after the recent rally is possible, a strong allocation to physical gold remains prudent. The real opportunity now is, however, in miners.
Introduction
The price of gold has been rallying strongly since mid-February, consistently reaching new historical highs almost every week. When examining a long-term chart, it appears that gold has recently broken out of a cup and handle formation that has been in place for 13 years. Although the current momentum may not be sustainable for much longer, and a retracement could occur in the short term, my outlook remains very bullish for the medium and long term.
The reasons for this belief are structural. Over the last few years, I have grown increasingly convinced that we are moving towards a new macro landscape, characterized by volatile but higher inflation, greater state intervention in the economy, abundant cheap money, but a limited supply of progressively more expensive commodities. Owning scarce assets will therefore become crucial. In fact, in similar historical scenarios, the highest real returns have not come from holding money, or even stocks in aggregate, but from assets that are recognized for their scarcity, such as land, precious metals, art (and now, potentially, crypto assets with a provable finite supply)....
Gold: The Long-Term Trend Is Up, But The Real Opportunity Now Is In Miners