Gold Hits Record $2,222; Eyes on $2,500 Amid Rate Cuts

Key Takeaway

Gold prices hit a record high of $2,222.39 per ounce, driven by rate cut expectations and geopolitical tensions.
Top hedge fund manager David Neuhauser predicts gold to reach $2,500 by end of 2025 due to potential Fed rate cuts and a weakening USD.
Neuhauser recommends investing in gold miners like Amaroq Minerals, Coeur Mining, and Wesdome Gold Mines for portfolio defense against inflation and a weakening dollar.

Gold Prices Soar to Record Highs

Gold prices have reached unprecedented levels, touching a new record high of $2,222.39 per ounce, driven by expectations of interest rate cuts by the Federal Reserve and heightened geopolitical tensions in Ukraine and Gaza. The anticipation of rate cuts, following the Fed's indication of three potential reductions this year, has fueled a significant rally in gold prices, with the precious metal last trading around $2,208 per ounce. This surge is underpinned by the traditional belief that gold prices ascend when interest rates fall, making bonds less appealing due to their diminished yields.

Central Banks and ETFs Amplify Demand

The rally in gold prices is not solely a result of investor speculation but is also supported by substantial purchases by central banks, accumulating over 2,100 tons in the past two years. This buying spree, combined with geopolitical risks and the potential for increased ETF holdings, cements gold's position as a safe-haven asset. Despite a 25% reduction in total ETF gold holdings, indicating a current lack of retail investor participation, there exists a significant opportunity for demand growth, particularly if yields continue to decrease. This scenario could propel gold prices towards the $2,500-$2,600 range, as forecasted by Bank of America and JPMorgan Chase & Co.

Investment Perspectives and Strategies

Investment strategies in gold are evolving, with experts like Jared Woodard from Bank of America and Natasha Kaneva from JPMorgan advocating for gold's hedging qualities and its low correlation to the S&P 500. They recommend physical gold ETFs, such as iShares Gold Trust Micro, for direct exposure to the commodity's value, over gold mining ETFs. Despite this, certain mining stocks like Barrick Gold Corp are favored for their potential high upside. Top hedge fund manager David Neuhauser suggests that commodities, including gold and oil, could constitute up to 25% of investors' portfolios, a significant increase from the traditional rule of thumb of around 10%.

Street Views

David Neuhauser, Livermore Partners (Bullish on gold):

"You have yields starting to claw back, you have the S&P [500] near record highs as well. And underneath the surface, you have the Fed looking to potentially cut rates here sometime this year... The Fed today continued to reflect 3 cuts are coming and with that, gold has now hit an all time high as expected. The USD is weakening therefore commodities should break out and soon be the best asset class given inflation has risen." "I think another aspect of why gold is something to go into is that when you look at the massive deficits that are being built in the U.S. and up, they talk about how many trillions in debt we have, I mean, that is going to continue to move higher and then we have an election later this year."
David Neuhauser on Amaroq Minerals (Bullish on Amaroq Minerals):

"Amaroq is a great ‘pure play’ mineral company that is about to get into production in 2024 with a high-grade, low-cost mine as well as a vast opportunity within copper and nickel and is in an OECD country. It is the last frontier and they have the best licenses."
David Neuhauser on Coeur Mining (Bullish on Coeur Mining):

"We think that this is the time that the stock could outperform over the next few years because they’ll get to free cash flow, which will be a first right now and they can start potentially paying dividends."
David Neuhauser on Wesdome Gold Mines (Bullish on Wesdome Gold Mines):

"Wesdome Gold Mines... fits his overall criteria for gold miners."