A new secular uptrend in gold?
It may be the case.
Gold has outperformed stocks and all other assets since 2022.
Since 2022, gold (GLD) is up 58.1%, while US large-cap stocks (SPY) and international (ex-US) stocks (VEU) are up 34.1% and 10%, respectively. Also, since 2022, bonds (TLT) are down 33.7%, and emerging markets (EEM) show a loss of 2.9%. In the same period, commodities (DBC) and the US dollar index (UUP) are up 20% and 27.8%, respectively.
Gold had a strong uptrend after the 2000 dot-com top in stocks and gained 506% in 12 consecutive up years.
Below is an excerpt from our last Weekly Market Report:
The main drivers of the 12-year rally were two back-to-back bear markets in the US and, after the GFC, fears of quantitative easing causing hyperinflation. Due to those fears not materializing, gold lost about 36% in the following three years, from 2013 to 2015.
Since 2016, gold has gained about 180%. The momentum accelerated in 2023 and 2024 with a gain of 44% due to rising inflation, exponentially rising deficit spending, and also geopolitical concerns. Due to fear of sanctions, some foreign countries and investors started diversifying their holdings and increasing their gold purchases. This trend will continue in the foreseeable future if there is no change in the prevailing geopolitical and economic regime.
As noted above, the current drivers of a potentially new secular uptrend in gold are the following:
Diversification of foreign investors due to fear of sanctions.
There is persistent inflation in the USA.
Increased deficit spending and skyrocketing public debt.
Geopolitical tensions and the Monroe Doctrine are significant developments.
Concerning #4, we think that a return to a "sphere of influence" in geopolitics will drive the price of gold up because cross-sphere-of-influence payments will be backed primarily by gold. This is due to the potential reintroduction of fixed exchange rates and capital controls. In effect, to deal with escalating geopolitical tensions and trade imbalances, we may see a return to a system similar to that of the Bretton Woods Agreement. Gold will play a major role in a possible basket of assets that will be used for the convertibility of currencies; that may even include cryptocurrencies but also commodities like oil, grains, and softs.
All in all, the current push of gold toward $3,000 per ounce is a strong indication that some changes, possibly significant, are going to occur in the next few years.
Also watch this video for some more technical details.
Disclaimer: The author of this article is not a registered financial adviser. No part of this article constitutes an offer to buy or sell any sort of security or financial product. Furthermore, no part of this article should be construed as advice or a recommendation for any type of financial transaction or investment decision.