Chart of the Week

ANOTHER GOLDEN YEAR?

It’s been a year since we first showed this chart and the initial publication proved well timed.

As predicted, last year’s Central Bank U-turn, which saw rate cuts begin despite steady economic growth and above-target inflation, triggered a boom in the precious metals complex.

Gold had a banner year, rising by approximately 30% in US dollar terms to a comfortable record high.

Despite pervasive investor scepticism towards the asset class, it has been performing well for several years now, particularly in risk-adjusted terms, but will the good times continue?
On the one hand the rally looks a little stretched and a high degree of retail investor participation (at least from Asian investors) suggests the bull market is entering a more mature phase.

However, we are in a highly unusual environment in which policymakers are easing liquidity conditions just as inflation rates are perking up.

This reinforces our long held view that we are in an era of “financial repression” whereby the Central Banks are devaluing fiat currencies to help manage the colossal debt burdens.

Should this trend continue (as we expect it to) a U$3,000/oz gold price is on the cards in 2025, but expect there to be plenty of volatility and the occasional large price drawdown too.