Gold: Triumph of Unpredictability

Gold investors are in an enviable position this year: no matter how you look at it, investments in the precious metal have so far only yielded gains. Since the beginning of 2024, the price of gold has risen by more than a quarter and is now settling at over $2,600 per troy ounce. Fahad Kamal of Coutts made a smart decision a year ago when he bought gold as a hedge while also betting on a rise in riskier asset classes. Surprisingly, both these riskier investments and gold achieved significant gains. Consequently, Kamal has now liquidated his gold positions to take profits and seek diversification elsewhere. The urge to realize profits is understandable, especially given the rapid price increase that has seen gold appreciate by 35 percent since the beginning of the year. At the same time, explaining this meteoric rise is challenging. Gold behaves differently from many other assets and its valuation is often driven by geopolitical uncertainties rather than economic fundamentals. Joni Teves from UBS points out that there isn’t a single reason for gold’s strength this year, but rather a combination of broad-based buying and a lack of sellers. This dynamic, coupled with the prospect of future U.S. interest rate cuts and a weaker dollar, is expected to drive the gold price higher according to forecasts. Dutch investment firm Robeco also advises treating gold with more respect, even if the general market scoffs at it. Gold continues to benefit from purchases by central banks and growing interest from investors in Asia. Thus, it remains a popular asset for those seeking to hedge against uncertainties. As Arnout van Rijn of Robeco states, "Buying begets more buying," this seems to secure the fate of gold in the near future.