Is the world entering a new era for gold investments?
Some banks' gold bulls seem to think so, because they increasingly favor the power of gold and emphasize its impressive track record. Prominent investment banks such as Societe Generale and Goldman Sachs are identifying gold-specific drivers, and they believe it's time to consider a heightened interest in gold investments.
Since the new millennium, gold has shown resilience and an ability to grow, climbing roughly 850% from January 2001 through September 2024.[1] While gold's performance is noteworthy , it also has outperformed other traditional assets.[2] With a proven ability to weather challenging interest rate climates, gold has shown exceptional durability, particularly from March 2022 through July 2023, a period during which the benchmark federal funds rate was raised 11 times.[3]
Changing economic landscapes, heightened geopolitical risk, fiscal recklessness, and global inflation are some of the most important gold drivers reshaping longstanding paradigms and beliefs.
In fact, analysts at Bank of America recently suggested swapping out bonds for commodities in the 60/40 portfolio model with gold, showing increased potential for more reliable diversification.[4]
And strategies from Societe Generale and Goldman Sachs focus on gold as the most deserving real asset in the current climate.
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What’s Behind Banking Gold Bulls Elevated Position in Gold?
Societe Generale's Global Asset Allocation Outlook clarifies that gold's upward trajectory is due to geopolitical uncertainty and a moderating inflation environment in the U.S.[5] They anticipate gold's future to be overwhelmingly positive, driven by factors such as geopolitics, the dollar, interest rates, increased central bank purchases, investor flows, and fundamentals.[6] At present, gold represents Societe Generale's entire position in commodities, with a 40% increased allocation to gold over the previous quarter.[7]
Goldman Sachs analysts also named gold as their top commodity allocation. They have "the highest confidence in near-term upside"[8] for gold due to gold-specific drivers, such as the tripling of central bank purchases, imminent Federal Reserve rate cuts, and gold's significant hedging value against geopolitical shocks.[9] They recommend investors to consider "going for gold."[10]
Diversification with Gold Can Also Apply to Individual Investors
The significant hedging value of gold is beneficial for investors at any level—not just high-level banking gold bulls.[11] With projections of global economic uncertainty, many investors are expected to examine gold’s possible benefits for diversification. Access to high-quality gold and silver bullion investments is easier than ever through tax-advantaged retirement accounts such as gold IRAs (consult a qualified professional for tax implications). For more details on this subject, click here. Augusta Precious Metals $0 (10 Years) $50,000 "Best Overall" by Money Magazine, Award-Winning for 6 Years, Thousands of 5-Star Rankings [1] CNBC.com, “Gold COMEX (Dec′24)” (accessed 9/19/24).[2] StockCharts.com (accessed 9/19/24).[3] FederalReserve.gov, “Open Market Operations” (accessed 9/19/24).[4] Sagarika Jaisinghani, Yahoo Finance, “Swap Bonds for Commodities in 60/40 Funds, BofA Strategists Say” (August 30, 2024, accessed 9/19/24).[5] Ernest Hoffman, Kitco, “Gold to average $2,800/oz by 2025, now represents 100% of commodity allocation – SocGen” (September 16, 2024, accessed 9/19/24).[6] Hoffman, “Gold to average $2,800/oz by 2025.”[7] Ibid.[8] Matthew Fox, Business Insider, “3 reasons to pile into gold with the metal poised to rally in 2025, according to Goldman Sachs” (September 3, 2024, accessed 9/19/24).[9] Ibid.[10] Ibid.[11] Pierre-Olivier Gourinchas, IMF.org, “July 16, 2024, accessed 9/19/24).Expand Details
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