As the price of gold continues to reach new all-time highs, positive expectations for its future are strengthening.
“Longer term, investors should expect gold to continue to act as a hedge against broader market volatility and uncertainty,” comment VanEck. Founded over 70 years ago, this American firm manages investment funds in multiple assets, including precious metals and bitcoin (BTC).
In a recent report, he explains that The price of gold has soared to new record highs this year, driven by demand from central banksEven those in emerging markets such as China, India and Türkiye have been increasing their holdings of the metal.
He explains that gold prices are greatly influenced by global economic conditions. The reason for this is that Its demand usually increases as a safe haven asset in times of uncertainty. As can be seen below, it has performed better than traditional assets in the 21st century.
“The current trend is consistent with previous periods when gold strengthened amid global uncertainties, suggesting a recurring pattern of investor behavior in times of economic stress,” VanEck warns.
According to his analysis, higher interest rates normally reduce the attractiveness of gold, as it does not generate interest like bonds. However, he clarifies that current trends deviate from this norm due to sustained inflationary pressures and economic uncertainties.
Therefore, it is emphasized that Strong investment demand for gold remains despite monetary policy easingThe Federal Reserve (Fed), the US central bank, cut rates last week for the first time in four years, beginning a period of reductions.
“Looking ahead, the anticipation of rate cuts by the Federal Reserve, coupled with continued inflationary pressures and geopolitical risks, will likely further bolster gold’s appeal as a hedge against market volatility,” VanEck said.
He also predicts that technological advances in gold mining and changes in consumer demand in sectors such as electronics and jewelry will continue to influence gold production and prices.
Based on the metal’s historical performance, strong gains, such as the one it has been experiencing, have often been followed by periods of lateral consolidation until a new catalyst emerges that drives its price even higher. For this reason, the management company expects a good performance in the short and long term.
“Gold is well positioned to continue its rally, especially if Western investors begin to return to the market,” he stressed. Against this backdrop, according to his view, Its price could reach USD 2,800 per ounce in the short term.
So far, the record price for gold has been above USD 2,640, which was recorded this week, as shown in the following chart.
While the global economic situation could change five years from now, boosting or hurting gold, VanEck expects it to continue to function as a safe haven asset over the longer term. “Looking ahead, the investment outlook for gold remains positive, with expectations that the market will continue to strengthen,” it says.
“Gold remains an indispensable asset in the global financial landscape and has demonstrated remarkable adaptability and resilience in a context of macroeconomic fluctuations and geopolitical tensions. This trend underlines gold’s enduring role as a safe haven in times of economic uncertainty and its attractiveness as a hedge against systemic risks and inflation.”
VanEck, a publicly traded fund issuing company.
Bitcoin could benefit as digital gold
The precious metal scenario also suggests a good outlook for bitcoin due to their similar role. Both assets have a decentralized emission and, in the case of bitcoin, it is limited, which facilitates its rise in demand and makes it seen as a safe haven asset. That is why the currency is called by many as “digital gold” or an improved version of the legendary asset, partly due to its resistance to censorship and freedom to transfer it.
Motivated by such attributes, among others, bitcoin exchange-traded funds (ETFs) appear to be taking market share from gold ETFs, as VanEck CEO Jan van Eck recently mentioned.
The businessman, who revealed that he owns 30% of his investment portfolio in BTC, foresees that bitcoin’s capitalization reaches at least half that of gold in five or ten yearsFurthermore, VanEck predicts that its price could reach USD 3 million by 2050.
Meanwhile, the digital currency remains in a corrective period six months ago after reaching a new price record of USD 73,700. Despite this, so far in 2024 it has registered an increase of 50%, a higher performance than gold. The metal, which is currently trading at historic highs, has experienced an appreciation of 28% in the same period.
