The gold market has maintained its position above $2,300 an ounce, yet it struggles to break past $2,350 an ounce. Despite its current lack of direction, one market strategist believes the metal is well-valued with limited downside risk.
In an interview with Kitco News, Joy Yang, Head of Index Product Management & Marketing at MarketVector Indexes, shared her insights on gold’s future trajectory. She expects gold prices to rise gradually, forming new bases after each rally.
Yang highlighted that gold established a solid foundation at $2,000 an ounce at the beginning of the year. Now, seven months later, that floor has shifted upwards by $200.
“Gold is definitely in a new comfortable range, and I just don’t see it going below $2,200 again,” Yang stated. “In a few months, I anticipate that floor could rise to $2,400. The risks and factors driving gold don’t seem to be changing in the next few years.”
Although gold has been consolidating within a narrow range since hitting a record high above $2,450 an ounce last month, Yang advised investors not to seek excitement from gold investments. She emphasized that gold is not meant to compete with high-volatility stocks like NVIDIA or meme stocks.
“Investors who buy and hold gold are more macro-focused,” she said, underscoring gold’s role as a long-term store of value amidst market volatility.
Yang suggested that general investors considering gold should observe who is already buying it to set their expectations. For over two years, global central banks have been the largest purchasers of gold.
“If you look at why central banks hold gold, it’s really to hedge their position and diversify their portfolios,” she explained.
Yang doesn’t foresee central banks halting their gold purchases as they continue to move away from the U.S. dollar, driven by the size and trajectory of U.S. government debt. The increasing debt makes it challenging for other nations to bear that burden.
With the November 2024 U.S. election on the horizon, Yang pointed out that neither major political party has a clear plan to address the growing debt. Democrats aim to sustain spending on social programs, while Republicans propose significant tax cuts.
“In the end, it’s all the same. We have this enormous U.S. dollar debt that needs to be repriced,” she said. “Someone still has to buy all this debt. But globally, there is a move to reduce dependence on the U.S. dollar. For them, gold remains a substantial store of value.”
While central banks have been the primary force in the gold market, Yang predicts that Western investors will eventually join in.
She anticipates gold’s next rally will occur once the Federal Reserve signals a reduction in interest rates. Currently, markets indicate a more than 60% likelihood that the U.S. central bank will begin easing rates by September.
