Is Gold A Good Place To Hide?

Despite the recent market rout, gold’s performance has maintained its leadership position. Global equities are up 7.5% in 2024YTD, global bonds are up 2.6% over the same period while gold prices have rallied by a solid 17%. Given our high conviction that the US economy will tip into recession by early 2025, should investors seek refuge in gold?

Our Global Investment Strategy (GIS) team is tactically positive on gold but neutral on a 12-month horizon.  

The fundamental backdrop is supportive of gold prices on a tactical time horizon. The pivot of many central banks towards rate cuts, along with expectations of a weaker dollar and positive price momentum will support the yellow metal in the near term.

However, beyond the tactical investment timeframe, we are neutral on gold as the asset class will be exposed to crosscurrents. On one hand, among commodity groups, precious metals have the least sensitivity to the businesse cycle and gold, in particular, has outperformed other precious metals during downturns. But on the other hand, elevated prices may cap central banks' demand for gold and the tailwind from central bank diversification is thus likely to fade. Moreover, gold sentiment is extremely bullish and net speculative positions are elevated, making gold prices vulnerable.