As the price of gold continues to reach new all-time highs, positive expectations for its future are strengthening. “Over the longer term, investors should expect gold to continue to act as a hedge against broader market volatility and uncertainty,” says VanEck. This American firm, founded more than 70 years ago, manages investment funds in multiple assets, such as the precious metal and bitcoin (BTC). In a recent report, it explains that The price of gold has soared to new record highs this year, driven by demand from central banks. Even emerging markets such as China, India and Turkey have been increasing their holdings of the metal. He details 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.
Gold performance is shown in blue, stocks in grey, bonds in light blue and US reserves in orange. Source: Seeking Alpha. “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 its analysis, higher interest rates typically reduce the attractiveness of gold, since it does not generate interest like bonds. However, it clarifies that current trends deviate from this norm due to sustained inflationary pressures and economic uncertainties. Therefore, it highlights that Strong investment demand for gold remains despite monetary policy easing. The Federal Reserve (Fed), the central bank of the United States, 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, together with continued inflationary pressures and geopolitical risks, will likely further reinforce the attractiveness of gold as a hedge against market volatility,” says VanEck. In addition, it foresees that technological advances in metal mining and changes in consumer demand in sectors such as electronics and jewelry will continue to influence gold production and prices. According to the historical behavior of the metal, strong increases, 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,” it emphasizes. In this context, according to his vision, 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.
Gold price per ounce per day so far in 2024. Source: TradingView. While the global economic situation could change five years from now, boosting or affecting gold, VanEck expects it to continue to function as a safe haven asset in 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 the face of macroeconomic fluctuations and geopolitical tensions. This trend underscores 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 company issuing exchange-traded funds.
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) seem to be taking market share from gold ones. This was recently mentioned by VanEck CEO Jan van Eck. The entrepreneur, who revealed that he owns 30% of his investment portfolio in BTC, Bitcoin's market capitalization is expected to reach at least half that of gold in five to ten years. Furthermore, 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 historical highs, has experienced an appreciation of 28% in the same period.