Bank of America's Hartnett Urges Gold Buy Amid Record Highs and Fed's Dovish Turn
Saturday, Aug 24, 2024 5:00 am ET
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Bank of America's chief investment strategist, Michael Hartnett, suggests that despite gold prices hovering near record highs, investors should still buy gold. Hartnett noted in his latest report that investors should do as central banks are doing—buy gold. The strategist argues that the anticipated interest rate cuts by the Federal Reserve in the coming months might lead to inflation rebounding next year, and historically, tangible assets like gold perform well during inflationary periods.
Shortly after Hartnett expressed his views, Federal Reserve Chairman Jerome Powell sent a clear dovish signal last Friday. Powell indicated that with the inflation rate only half a percentage point above the Federal Reserve’s 2% target and rising unemployment rates, "the time for policy adjustment has arrived." This statement solidified expectations for the Federal Reserve to cut rates for the first time during its meeting on September 17-18.
Meanwhile, precious metal prices have been experiencing a record-breaking rally. Since the beginning of this year, gold prices have surged by approximately 20%, outperforming the S&P 500 index, which rose by 18.8%, and even technology stocks.
Hartnett emphasized that gold is the only asset outperforming U.S. tech stocks. The report highlighted that a perplexing factor behind the rise in gold prices is that investors haven’t consistently been chasing gold. Instead, the gold market has seen a net outflow of $2.5 billion, suggesting that some investors have been taking profits amid record high prices. However, this also indicates that the buying pressure on gold is coming from different segments of the market.
Hartnett further explained that the coexistence of record-high gold prices and net outflows can only be attributed to unprecedented buying by central banks. "Gold is now the second-largest reserve asset (16.1% vs Euro's 15.6%) and is one of the least correlated assets with stocks among all asset classes," the report stated.
Lastly, Hartnett's report suggested potential gold ETFs worth considering, naming iShares Gold Trust Micro (IAUM) and SPDR Gold MiniShares Trust (GLDM) as "top picks."
Gold prices recently surpassed $2,500 per ounce, setting a new historical high. This year, gold has risen by 21%, becoming one of the best-performing major commodities of 2024. Leading banks, such as Citi and ANZ, suggest that gold still has room for further gains. Consultation firm Metals Focus predicted in June that gold prices would set new records this year. Analysts at Citibank noted on Monday that gold investors are bullish for the next three to six months and expect gold prices to reach $3,000 per ounce by mid-2025, with an average price of $2,550 per ounce in the fourth quarter of this year.
Bank of America also highlighted that with the Federal Reserve beginning to cut rates and rising debt leading to economic uncertainty, gold prices may reach $3,000 per ounce in the next 12 to 18 months.
In conclusion, whether gold prices will continue to rise remains uncertain, but many believe there is still room for growth.
Shortly after Hartnett expressed his views, Federal Reserve Chairman Jerome Powell sent a clear dovish signal last Friday. Powell indicated that with the inflation rate only half a percentage point above the Federal Reserve’s 2% target and rising unemployment rates, "the time for policy adjustment has arrived." This statement solidified expectations for the Federal Reserve to cut rates for the first time during its meeting on September 17-18.
Meanwhile, precious metal prices have been experiencing a record-breaking rally. Since the beginning of this year, gold prices have surged by approximately 20%, outperforming the S&P 500 index, which rose by 18.8%, and even technology stocks.
Hartnett emphasized that gold is the only asset outperforming U.S. tech stocks. The report highlighted that a perplexing factor behind the rise in gold prices is that investors haven’t consistently been chasing gold. Instead, the gold market has seen a net outflow of $2.5 billion, suggesting that some investors have been taking profits amid record high prices. However, this also indicates that the buying pressure on gold is coming from different segments of the market.
Hartnett further explained that the coexistence of record-high gold prices and net outflows can only be attributed to unprecedented buying by central banks. "Gold is now the second-largest reserve asset (16.1% vs Euro's 15.6%) and is one of the least correlated assets with stocks among all asset classes," the report stated.
Lastly, Hartnett's report suggested potential gold ETFs worth considering, naming iShares Gold Trust Micro (IAUM) and SPDR Gold MiniShares Trust (GLDM) as "top picks."
Gold prices recently surpassed $2,500 per ounce, setting a new historical high. This year, gold has risen by 21%, becoming one of the best-performing major commodities of 2024. Leading banks, such as Citi and ANZ, suggest that gold still has room for further gains. Consultation firm Metals Focus predicted in June that gold prices would set new records this year. Analysts at Citibank noted on Monday that gold investors are bullish for the next three to six months and expect gold prices to reach $3,000 per ounce by mid-2025, with an average price of $2,550 per ounce in the fourth quarter of this year.
Bank of America also highlighted that with the Federal Reserve beginning to cut rates and rising debt leading to economic uncertainty, gold prices may reach $3,000 per ounce in the next 12 to 18 months.
In conclusion, whether gold prices will continue to rise remains uncertain, but many believe there is still room for growth.