Gold prices reach to new heights

In this article, Alain Freymond, our Group Chairman, and Ahmad Saidali, our Group CEO, offer insights on the recent surge in gold prices toward new highs after a period of stabilization.

Gold is resuming the upward trend predicted a few weeks ago

Prices of the yellow metal have been soaring towards new highs in recent days after having long stabilized at levels close to their previous peaks of 2020, 2022, and 2023 slightly below $2,100 per ounce. Gold prices did not resist profit-taking in 2023 as they approached historic highs, while the stock market environment was characterized by a tightening of monetary conditions and a rise in bond yields. A few weeks ago, we noted that the recent tensions in long-term interest rates towards 5% per year had impacted the price of an ounce of gold in dollars ($1,860 per ounce), leading to divestments in favor of investments offering a yield higher than 5% in USD in the short term.

Physical gold ETFs had recorded outflows of around –12% between June 2023 and today. We then mentioned that the evolution of the “trade-weighted” dollar and interest rates should soon once again become supporting factors for a further increase in gold prices.

From this perspective, we believe that the approaching date of the next Federal Reserve rate cut would be a favorable factor for a renewed interest in the yellow metal, especially as we see the recent rebound in long-term rates reaching its peak. Further downward adjustments to interest rates will also weigh on the dollar, thus likely contributing to a bullish revival in gold prices.

We believe that investors are significantly underexposed to gold, and even a modest resurgence of interest could have significant implications in the current context for gold. The flow of investment into physical gold is barely in the recovery phase, while investor interest should now shift towards gold mines, which are currently unfairly penalized.