Andreja Stojanovic
Gold has been the talk of the town throughout 2024 as it recorded stellar growth and hit multiple new all-time highs (ATH) as the year unfolded.
Still, despite the performance and bullishness, the fact it has come so high – and reached a new ATH late on Thursday, October 17 – gave rise to the question: Is it too late to gain exposure to gold?
To put it in perspective, with a press time price of $2,710, gold is nearly $700 above its level at the start of 2024 and between $800 and $900 above the levels it mostly traded at between 2020 and late 2023.
Despite the 31.38% year-to-date (YTD) and 81.65% 5-year rises, there is no shortage of prominent experts and reputable organizations that have no doubts that the commodity remains a strong investment.
Is gold the last ‘safe haven’ standing?
The most recent bullish analysis came on October 17 – shortly before the new ATH was hit – as the Bank of America (NYSE: BAC) urged investors, private institutions, and central banks to gain more exposure to gold.
According to BofA, the precious metal is the last true ‘safe-haven’ asset and might become an invaluable source of stability amidst the risks emerging from the U.S.’s growing national debt.
Indeed, not only has the national burden become substantially bigger than the gross domestic product (GDP) in 2024, but other recent reports indicate that Americans will have to choose between a lot more debt and even more debt in November.
On October 7, the Committee for a Responsible Federal Budget (CRFB) published its estimate that the Kamala Harris plan would add $3.5 trillion to the burden by 2035, and Donald Trump’s $7.5 trillion.
Simultaneously, Bank of America pointed toward risks faced by Treasury supply. Finbold previously reported a divergence between price movements of gold and bonds, a rather quaint feature of the 2024 market.
Finally, BofA’s estimates that gold will climb to $3,000 by the end of 2025 do much to comfort investors seeking to enter a commodity position in October 2024, particularly given that the estimate is relatively conservative.
Specifically, several other experts and strategists – Bloomberg’s Mike McGlone perhaps being the most notable – have maintained since 2023 that the world’s biggest commodity by market cap will hit $3,000 before the current year ends.
What is driving the price of gold?
The notion that gold has much upside ahead is reinforced by its remarkable price stability in 2024. Indeed, despite several pullbacks and likely correction zones, the precious metal has mostly remained steady in its upward path.
Such a trend can, in part, be explained by a central bank buying spree that has been unraveling in recent months and has been spearheaded by the BRICS countries – Brazil, Russia, India, China, and South Africa.
Specifically, the loose coalition – along with a significant portion of the Global South – has been seeking to reduce its reliance on the American dollar, both due to the heightened sanctions pressure against Russia and the fact that the U.S. has been generously applying these restrictions over the years.
In 2023, the U.S. Treasury reportedly admitted that the extensive use of unilateral sanctions has begun severely damaging the dollar’s dominance. BRICS+ has recently started increasing its efforts to trade in local currencies and is likely stockpiling gold as an alternative reserve asset.
Finally, if the common interpretation that the 2024 geopolitical situation is driving the price of gold up, it appears likely that the bullish scenarios that estimate the commodity hitting $3,000 sometime in the next two to fourteen months will indeed play out.
An alternative reading that part of the rally is the fact gold is extensively used in advanced electronics – and the incredible growth of the semiconductor sector – could also either bolster of spoil the bull case, depending on where the needle falls in the artificial intelligence (AI) boom vs. AI bubble debate.
