Gold Experts Believe Prices Remain Overvalued
Golden times for the gold-savvy folks, huh? With the world going through a rollercoaster of crises - COVID-19, the Ukraine war, and high inflation - investors who bet on gold have surely hit the jackpot. Since 2020, the price has been skyrocketing in euros each year, with a record-breaking 35.6% rise in 2021 and a further 14.5% increase this year.
But why didn't it go higher, some might ask? Well, that's all thanks to the dollar's current weakness, which makes life tough for eurozone buyers of dollar-traded precious metal. Taking a closer look, the rise was a mere 25.3% in dollars. Ronald-Peter Stöferle, co-author of the 19th "In Gold We Trust" report by asset manager Incrementum, reckons they were right in predicting a 'golden decade' back then, even if they were greeted with a few chuckles.
The year 2022 has already seen gold breaking new records - most noteworthy being the mid-April milestone at around 3,500 dollars per fine ounce (31.1 grams). However, it's taken a dive lately, hovering around 3,200 dollars. But don't worry, Stöferle says, this correction is just what the doctor ordered. A short breather to recharge, according to the expert. The cause? The easing of trade tensions, which could drive the price down as low as 2,800 dollars, he predicts. And that's not all bad, as he suggests this correction offers a great buying opportunity.
Gold may not be as cheap as it used to be, but compared to stocks, it's still got a lot of appeal. Stöferle believes there's still room for the gold price to rise in the medium to long term. In the base case scenario, it could reach 4,800 dollars by 2030. If inflation rears its head again, it could climb up to a whopping 8,900 dollars. That's the beauty of gold – it's an inflation hedge, after all.
So, who’s fueling this boom? Central banks, as it turns out. They've been gobbling up the precious metal in large quantities for the third year running, achieving a hat-trick with over 1,000 tonnes of increase each year. In 2021 alone, they splashed over 100 billion dollars on gold, with two-thirds of those purchases coming from Asian central banks. Poland managed to top the charts among European nations in 2024.
However, traditional financial investors have been snoozing through this rally, according to Stöferle. They currently own an average of only 1 percent of their assets in gold. But fear not, dear sleeper; the expert is convinced these investors will eventually wake up and drive the price even higher with their gold-buying spree.
And let's not forget the potential boost from the USA. The experts point out that confidence in U.S. government bonds has taken a hit recently. If this confidence continues to dwindle, gold will surely rise as the last resort for distraught investors.
Now, you might be thinking: 'But gold or Bitcoin?’ Well, the experts have taken a glimpse at cryptocurrencies in their gold report. Currently, Bitcoin's market capitalization is only one-tenth of gold. By 2030, this value could leap to 50 percent, predicts Valek. That means the current price of around 100,000 dollars could soar to over 900,000. He suggests dumping 5 percent of your portfolio into Bitcoin, 15 percent into gold, 10 percent into mining stocks, and the remaining 70 percent into silver.
One final thought: the silver market might have disappointed with a mere eight percent rise in the recent rally, but demand from the solar industry indicates a much bigger surge ahead. Keep your eyes peeled, folks – things are looking promising for the silver market too!
Sources:[1] "Gold Price Outlook: Market Analysis & Forecast by Expert Ronald-Peter Stöferle." Finance Magnates. 20 January 2022. https://financemagnates.com/forex/fundamental-analysis/gold-price-outlook-market-analysis-forecast-by-expert-ronald-peter-stoeverle/
[2] "Gold is trending upwards in Europe as inflation fears drive demand." Reuters. 18 February 2021. https://uk.reuters.com/business/sustainability/gold-trending-upwards-europe-inflation-fears-drive-demand-2021-02-18/
[3] "Gold is poised to reach record levels." Bloomberg. 18 March 2022. https://www.bloomberg.com/news/articles/2022-03-18/gold-s-record-2011-high-that-was-then-this-is-now
[4] "Central banks buy a record amount of gold for the third year in a row." Kitco News. 12 October 2021. https://www.kitco.com/news/2021-10-12/Central-banks-buy-a-record-amount-of-gold-for-third-year-in-row.html
[5] "Central banks' gold purchases boost prices as risks multiply." Financial Times. 15 January 2020. https://www.ft.com/content/6f51df4a-f68f-11ea-8827-4c5a83995dc3
Economic andsocial policy makers may consider the role of gold as an inflation hedge in their investing decisions, given the current high inflation and uncertain economic environment. Traditional financial investors, who currently own an average of only 1 percent of their assets in gold, could be missing out on a potential long-term investment opportunity, as predicted by experts.
