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Here’s what you need to know this week:
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Dear Reader,
While the world’s been captivated by Olympic gold, another type of gold has been making history.
After a powerful spring surge that saw gold prices break $2,400 for the first time, the precious metal remained steady through early summer.
But this month, gold made a stunning move… shattering the $2,500 barrier to reach an all-time high.
Catalysts Driving Gold Higher
While Middle East tensions initially sparked gold’s price surge last year, new drivers have emerged.
The Federal Reserve’s potential rate cuts and the looming US election are now propelling gold’s ascent.
Despite its impressive heights, gold’s growth story is far from over. Major players are betting big on the precious metal:
- UBS: $2,600 gold by year-end
- Morgan Stanley: $2,650 gold in Q4 2024
- Goldman Sachs: $2,700 gold by December (base case)
Remarkably, these big banks and investment firms have already had to raise their gold price targets in recent months.
With gold knocking on the door of the lower-end estimates, further upward revisions may be on the horizon.
Let’s dive into the charts to uncover what they reveal about gold’s current position and future potential…
What Golds Around Comes Around
First off, let’s check out what the seasonal trend looks like in gold.
Strong Gold Seasons
Going back as far as 1970, on average towards the middle of the year, gold prices tend to quiet down until the end of summer.
This does somewhat match what we’ve seen so far this year, with price activity cooling off after March’s explosive rally.
More to the point, two of gold’s historically strongest months in terms of price performance—September and December—are still ahead of us.
However, in-between those two months lies the US election season:
Shown above is a table of gold’s return during the period from two months before to two months after past US presidential elections—September through January, alongside the same for the S&P 500.
As you can see, despite gold’s traditionally strongest months of September, December, and January all falling within this period, election cycles have historically not been beneficial to the price of gold.
Stock markets, on the other hand, have generally flourished in the wake of a new presidency.
The 2008 election, which coincided with the Global Financial Crisis, stands as the sole exception.
- As Obama took office, the S&P 500 plummeted while gold prices soared, proving that extraordinary circumstances can override the usual election cycle trend.
The Fed Rate Cut Wild Card
The market now expects 6 rate cuts from the US FED by March 2025, and traders are pricing in a 63% chance of an upcoming Federal Reserve rate cut in September.
For a quick reminder: traditionally, rate cuts have been said to have a positive impact on gold prices.
In theory, lower interest rates means lower yields on fixed-income investments like bonds, which makes gold more attractive as an investment.
In this chart of gold prices vs. interest rates, periods of Fed rate cuts have been highlighted in red.
- Through each of the previous rate cut periods going back to 1990, the average gold price performance during the rate cuts was a 3.11% gain.
So, it should come as no surprise that gold prices have been steadily creeping up as the chances of a September rate cut continue to increase.
The Man with the Golden Gab
By the time you read this piece, Fed Chairman Powell will have made the announcement.
Between this and gold’s seasonal trend, there’s plenty of energy to push prices even higher before year’s end.
But don’t forget: it takes 15.7 years, on average, for a gold project to go from prospect to producing mine.
If you think gold’s going to hit $3,000 at any point in the next decade and a half, the best time to build a gold mine was yesterday.
Luckily for you, I’ve already identified which gold companies have a head start on their competition—the ones most likely to be buyout targets when the next big gold rush hits.
- In fact, one of the companies on my watchlist was already acquired at a generous premium just last month.
But don’t worry, there’s still five more left that I’m keeping my eyes on.
To see which five gold companies I think are next on the mining majors’ shopping lists, consider purchasing a subscription to my premium newsletter service, Katusa’s Resource Opportunities, here.
You might be waiting another four years for more gold medals.
But another rally in gold could be coming a lot sooner than that, and I want to be prepared.
Regards,
Marin Katusa
Details and Disclosures
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