A post-election slump may be stifling gold’s 2024 rally. But global investment firm Goldman Sachs views this as a temporary setback.
The precious metal is up close to 30% for the year. But it has dipped following the election, dropping about 3% within the past month. Meanwhile, stocks have been heading higher, with the S&P 500 rising almost 6% in the same time frame as investors dialed up the risk and scaled back on safe haven assets.
However, easing monetary policy and central bank buoying could help support gold’s price in the new year, according to Goldman Sachs.
“Since 2022, gold prices have surged 40% even as US interest rates were climbing ,” noted Lina Thomas, commodities strategist with Goldman Sachs Research. “That is very strange. Typically, higher interest rates make gold less attractive – because gold doesn’t pay any interest, unlike bonds.”
Thomas noted that this correlation changed in 2022 during Russia’s invasion of Ukraine. The freezing of Russia’s assets by Western countries made gold an attractive option as opposed to the dollar. The result was increased central bank buying, which supported gold’s price even as the Federal Reserve was hiking interest rates.
“That was a wake-up call for central banks worldwide,” Thomas added. “They began to diversify their reserves away from the dollar and into an asset no one can freeze – and that is gold.”
Rising global tensions have added to gold’s appeal this year as risk-averse investors demanded the precious metal for safe haven purposes. Even if global tension fears ease and investors develop an appetite for riskier assets, central bank buying should once again support prices.
“We don’t see central bank demand slowing down,” Thomas said. “And with the Fed cutting rates, investors are jumping back in, too.”
Buy the Dip With PHYS
If Goldman’s forecast holds, now is an ideal time to buy the dip if gold’s rally persists in 2025. Rather than purchase gold itself, an alternative way is exposure via the Sprott Physical Gold Trust (PHYS).
PHYS allows gold exposure without the logistical requirements of storing the precious metal. In addition, for those who want a more tangible investment experience, PHYS allows investors to convert their fund shares into physical bullion. This offers investors the feasibility and flexibility when it comes to adding the precious metal to diversify a portfolio.
Past performance is no guarantee of future results. One cannot invest directly in an index. For the latest standardized performance and important risk disclosures regarding Sprott investment products, including each fund’s prospectus, which should be read carefully before investing, please review each product’s webpage by clicking on the corresponding ticker:
Exchange Traded Funds (ETFs): SETM, LITP, URNM, URNJ, COPP, COPJ, NIKL, SGDM and SGDJ
Physical Bullion: PHYS, PSLV, CEF and SPPP
