WGC sees pathway to US$3000/oz gold
Gold hits yet another record
World Gold Council market strategist, North America and principal chief executive officer funds Joseph Cavatoni believes gold will continue to breach new record highs.
On Monday, spot gold hit a fresh record high of US$2588.70 an ounce, setting the scene for an upbeat Gold Forum Americas in Colorado Springs.
“It’s almost getting a little bit uncomfortable because every time we turn around, we hit a new [record],” Cavatoni said.
“It almost gets a bit embarrassing.”
Gold’s record run so far in 2024 comes off the back of a 15% rise in the price last year.
“We thought we had a fantastic year in 2023, only to be trumped – no pun intended – in 2024 where we’re outperforming almost all asset classes,” Cavatoni said.
He said gold was enjoying momentum from both tactical, short-term drivers and strategic, long-term drivers.
Cavatoni said the sustained level of support for gold made US$2700/oz and even $3000/oz price targets “all very realistic”.
Average annual net demand for gold is roughly 3126 tonnes or about US$195 billion.
Jewellery demand comprises 35% of demand, down 19% and below 40% for the first time as consumers pull back on spending at times of record prices.
“It’s no longer playing as key a role,” Cavatoni said.
Investment comprises 39% of demand.
“What’s interesting about what we’re seeing at the moment is investment continues to rise,” Cavatoni said.
He noted the publicity about central bank buying, which was for a valid reason, as demand in the first half of 2024 was the highest on record.
Emerging market central banks had significantly increased their buying.
Based on a WGC survey, Cavatoni said the central bank buying was due to less interest in banks holding US dollars and euros.
“They’re finding that gold serves an excellent portfolio diversifier on the home front,” Cavatoni said.
Gold as a “long-term store of value” was rated as the number one reason for buying, followed by “performance during times of crisis”, “effective portfolio diversifier”, “no default risk” and ‘historical position”, which dropped after being the number one reason in almost all previous surveys.
One element that had not gotten as much attention was the emergence of an Eastern investment community, which were accounting for increased ETF flows.
Cavatoni said ETF flows were trending up and could see a major catalyst this week.
The US Federal Reserve is expected to cut interest rates on Wednesday.
“The rate environment will bring back Western investors,” Cavatoni said.
“We’re waiting for this catalyst, the Western flows.”