Feb 24, 2024
Gold prices stay strong while stocks fall sharply
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Investors who previously predicted a significant downturn in precious metals prices are now reconsidering their stance. Following the post-election decline, gold and silver prices have found stability and show signs of potential growth.
The stock market recently experienced significant turbulence, with a 10-day decline in December, culminating in a dramatic 1,100-point drop on Wednesday.
The Federal Reserve implemented an anticipated quarter-point reduction in its overnight borrowing rate, setting the target range at 4.25% to 4.5%. The central bank’s Wednesday announcement revealed plans for only two rate cuts in 2025, fewer than previously projected. Fed Chair Jerome Powell stated, “The central bank’s move to cut rates in recent months allows it to be more cautious as we consider more adjustments to our policy rate.”
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Gold has maintained its position above $2,500 per ounce throughout December, defying predictions of a drop below $2,000. Silver has demonstrated even greater strength, maintaining levels near $30 since September.
“This is exactly what we hoped to see for our clients,” said Jonathan Rose, CEO of Genesis Gold Group. “We anticipated three things: a Trump victory, a quick dip, then a return to a state of stability after the rate cut that makes precious metals the ideal hedge, especially for retirement accounts.”
The anticipated trade conflicts, particularly with China, are viewed as catalysts for de-dollarization. BMO analysts project continued Chinese involvement in the gold market in response to President Trump’s tariff policies.
“We do not see global financial systems as being fully prepared for this, and hence gold is once more being pulled back into the monetary system,” the analysts said.
Physical precious metals are increasingly being considered for retirement account protection. Genesis Gold Group provides specialized services in this area, offering guidance on tax-free rollovers and transfers into gold IRAs.
UBS anticipates increased gold demand in investment portfolios for the coming year.
Gold prices have been on a tear this year, hitting record after record. Economic uncertainty and geopolitical tensions have been bolstering the traditional safe-haven asset. But also juicing the rally has been surprising demand from China https://t.co/6WnsqqRRL8 pic.twitter.com/yYY6DTrDjG
— Bloomberg Originals (@bbgoriginals) December 20, 2024
“While US President-elect Donald Trump’s policy agenda has been well broadcasted, uncertainty remains on what will be implemented from fiscal, trade, and geopolitical standpoints, especially given his transactional approach,” they said. “With the Russia-Ukraine war still ongoing, and the situation in the Middle East no less complicated, we think investor demand for hedges should rise further, boosting inflows to gold exchange-traded funds.”
The recent central bank interest rate reduction of 25 basis points in mid-December strengthens the case for gold investment in 2025.
“This should reduce the opportunity cost of holding the metal, which is non-interest-bearing,” they wrote. “A weaker US dollar in the medium term, due to lower rates and concerns over the US government debt trajectory, should also support gold prices. Since gold is denominated in US dollars, a weakening of the US currency makes the metal cheaper for non-dollar investors, bolstering demand.”
Based on these factors, UBS maintains an optimistic outlook for gold, projecting prices to reach $2,900 per ounce by the end of 2025.
