(Kitco News) – While the Federal Reserve is delaying rate cuts due to inflation, the economy is still getting lots of support, noted Eric Strand, founder and portfolio manager of AuAg Funds.
In early May Strand spoke to Kitco Mining at Deutsche Goldmesse.
Central Banks and Gold
Strand believes central bank buying, signs of continued monetary easing, and the massive deficits incurred by the U.S. are primary drivers behind gold’s surge.
“Even if we don’t have seen the rates coming down, the Fed has been doing some kind of backdoor quantitative easing,” said Strand, who noted that the monetary base is going up and the U.S. is running big deficits. “It’s a very expensive economy. The lower rates are coming, and the market can see it.”
Additional Insight: Central banks worldwide have been increasing their gold reserves as a hedge against geopolitical risks and the potential devaluation of fiat currencies, further supporting the bullish trend in the gold market.
Gold Price Forecast
While he initially predicted a target of around $2,475, he now believes gold could climb even higher this year, given the market momentum. Strand also points to increased geopolitical risks and the weaponization of the U.S. dollar as reasons why central banks, especially in BRICS nations, are turning to gold as a safe haven asset. When comparing gold’s price even at $4,000 per ounce to the combined U.S. debt and federal reserve balance sheet, he argues that gold is still undervalued and therefore likely to continue climbing.
Gold Equities Outlook
While gold equities haven’t mirrored the bullish price movement, Strand expects significant leverage, margin expansion, and strong performance for the remainder of the year, possibly even hitting triple-digit gains. However, he notes the lack of investment in exploration remains a long-term concern and could impact supply down the road.
Coverage of Deutsche Goldmesse is sponsored by Dynacor.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
Additional Insight: The current economic environment, characterized by low interest rates, geopolitical tensions, and currency devaluation fears, is likely to continue supporting the upward trend in gold prices and the performance of gold-related investments. Additionally, the lack of exploration investment in the gold mining sector could lead to future supply constraints, providing further tailwinds for the precious metal’s value.
