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From 2011 to 2023, gold prices underperformed dramatically and chopped back-and-forth in a frustrating, seemingly endless range. Finally, 2024 looks like the year when the precious metal is finally getting its shine back. Year-to-date. The SPDR Gold Shares ETF ((GLD - Free Report) ) is up 17.47%, outperforming the S&P 500’s 12.69% gains. The long-awaited uptick in performance is impressive when investors consider that 12% on the S&P 500 is already a better-than-average year. Below are ten reasons the outperformance should continue.
1. Central Banks are Hoarding Gold
Central banks worldwide added nearly 500 tons of gold to their reserves in the first through the first half of 2024, breaking 2023’s first-half record. The reason behind the flurry of buying is hard to pinpoint, but it may mean different things for different countries. Some countries may want to diversify and ease dependence on the U.S. dollar, fight inflation, or help stabilize their economy.
Will Central Banks Gold Buying Frenzy Continue?
Recent extreme volatility in the forex market due to the unraveling of the “Yen Carry Trade” should act as a bullish tailwind for gold. Furthermore, the latest survey by the World Gold Council discovered that 29% of central banks surveyed plan to add more gold over the next year (a record for the survey which dates back to 2018), while only 3% plan to decrease reserves.
2. Generational Technical Breakout
Early in 2024, the yellow metal broke out of a decade-long, picture-perfect, cup-with-handle base structure. Long-term breakouts of this nature tend to persist for years. As famed technician Louise Yamada once proclaimed, “The longer the base, the higher in space.”
Image Source: TradingView
3. Costco Sparks Retail Gold Demand
Costco Wholesale ((COST - Free Report) ), the third-largest retailer, added gold bars to its locations in the first half of 2023. Not long after, CNBC reported that the retailer was selling up to $200 million in gold bars a month. Clearly, retail demand exists for gold, and Costco, with its massive and loyal following, is helping to facilitate that demand.
4. Relative Strength vs Silver
Though gold and silver are somewhat correlated, gold has begun to dramatically outperform silver and the iShares Silver Trust ((SLV - Free Report) ) over the past two months,a sign of relative strength. As an investor, striving to be in the leaders in a sector versus the laggards is best.
Image Source: goldprice.org
5. Gold as a Safe-Haven Investment
At the time of this writing, the Washington Post is reporting that Iran“intends to strike American targets in Syria and Iraq, in addition to Israel.” It is becoming evident to those following the news that the geopolitical situation is becoming sticky in the Middle East and elsewhere. Beyond the headlines, decisive action in oil and defense stocks indicates that the situation may worsen before it gets better. Historically, investors flock to gold as a safe-haven asset.
6. Gold as a Store of Value
For thousands of years, investors have used gold as a safe-haven asset due to its price stability, global use, and ability to maintain value. Though Bitcoin and Bitcoin proxies like the iShares Bitcoin Trust ETF ((IBIT) ) have outperformed recently, gold sacrifices performance to gain stability in return. With the world in an unstable place, it’s hard to distrust “old reliable” at this juncture.
7. Gold Rises on New Interest Rate Cuts
Investors are pricing in a rate cut in September after U.S. unemployment numbers unexpectedly spiked last month from 4.1% to 4.3%. Historical data from a JP Morgan ((JPM - Free Report) ) analyst suggests that the first rate cut tends to be bullish for gold.
Image Source: JP Morgan
8. Gold has Bullish Year-End Seasonality
When looking to own gold, I always look at seasonal trends. In my experience, gold tends to be one of the assets that responds best to seasonal changes. According to this data, September through February is the optimal time to be long gold.
Image Source: Seaonax
9. World's Largest Gold Miner: Bullish Forward Estimates
Because Newmont Mining ((NEM - Free Report) ) is the largest gold miner, it’s worth looking at the company’s forward estimates. NEM earns a best possible Zacks Rank #1 (Strong Buy) and analysts see healthy, high double-digit EPS growth in the coming quarters.
Image Source: Zacks Investment Research
10. Gold Stocks Enjoy Cheap Valuations
Though many gold stocks are growing rapidly, they remain inexpensive from a valuation perspective. For example, AngloGold ((AU - Free Report) ) has a forward P/E ratio of 11.11x, roughly half that of the S&P 500 Index.
Image Source: Zacks Investment Research
Bottom Line
Volatile global currency markets, geopolitical escalations, and upcoming interest rate cuts are just some of the reasons to be long gold over the next 6-12 months.
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10 Reasons to Buy Gold Stocks in 2024
From 2011 to 2023, gold prices underperformed dramatically and chopped back-and-forth in a frustrating, seemingly endless range. Finally, 2024 looks like the year when the precious metal is finally getting its shine back. Year-to-date. The SPDR Gold Shares ETF ((GLD - Free Report) ) is up 17.47%, outperforming the S&P 500’s 12.69% gains. The long-awaited uptick in performance is impressive when investors consider that 12% on the S&P 500 is already a better-than-average year. Below are ten reasons the outperformance should continue.
1. Central Banks are Hoarding Gold
Central banks worldwide added nearly 500 tons of gold to their reserves in the first through the first half of 2024, breaking 2023’s first-half record. The reason behind the flurry of buying is hard to pinpoint, but it may mean different things for different countries. Some countries may want to diversify and ease dependence on the U.S. dollar, fight inflation, or help stabilize their economy.
Will Central Banks Gold Buying Frenzy Continue?
Recent extreme volatility in the forex market due to the unraveling of the “Yen Carry Trade” should act as a bullish tailwind for gold. Furthermore, the latest survey by the World Gold Council discovered that 29% of central banks surveyed plan to add more gold over the next year (a record for the survey which dates back to 2018), while only 3% plan to decrease reserves.
2. Generational Technical Breakout
Early in 2024, the yellow metal broke out of a decade-long, picture-perfect, cup-with-handle base structure. Long-term breakouts of this nature tend to persist for years. As famed technician Louise Yamada once proclaimed, “The longer the base, the higher in space.”
Image Source: TradingView
3. Costco Sparks Retail Gold Demand
Costco Wholesale ((COST - Free Report) ), the third-largest retailer, added gold bars to its locations in the first half of 2023. Not long after, CNBC reported that the retailer was selling up to $200 million in gold bars a month. Clearly, retail demand exists for gold, and Costco, with its massive and loyal following, is helping to facilitate that demand.
4. Relative Strength vs Silver
Though gold and silver are somewhat correlated, gold has begun to dramatically outperform silver and the iShares Silver Trust ((SLV - Free Report) ) over the past two months,a sign of relative strength. As an investor, striving to be in the leaders in a sector versus the laggards is best.
Image Source: goldprice.org
5. Gold as a Safe-Haven Investment
At the time of this writing, the Washington Post is reporting that Iran “intends to strike American targets in Syria and Iraq, in addition to Israel.” It is becoming evident to those following the news that the geopolitical situation is becoming sticky in the Middle East and elsewhere. Beyond the headlines, decisive action in oil and defense stocks indicates that the situation may worsen before it gets better. Historically, investors flock to gold as a safe-haven asset.
6. Gold as a Store of Value
For thousands of years, investors have used gold as a safe-haven asset due to its price stability, global use, and ability to maintain value. Though Bitcoin and Bitcoin proxies like the iShares Bitcoin Trust ETF ((IBIT) ) have outperformed recently, gold sacrifices performance to gain stability in return. With the world in an unstable place, it’s hard to distrust “old reliable” at this juncture.
7. Gold Rises on New Interest Rate Cuts
Investors are pricing in a rate cut in September after U.S. unemployment numbers unexpectedly spiked last month from 4.1% to 4.3%. Historical data from a JP Morgan ((JPM - Free Report) ) analyst suggests that the first rate cut tends to be bullish for gold.
Image Source: JP Morgan
8. Gold has Bullish Year-End Seasonality
When looking to own gold, I always look at seasonal trends. In my experience, gold tends to be one of the assets that responds best to seasonal changes. According to this data, September through February is the optimal time to be long gold.
Image Source: Seaonax
9. World's Largest Gold Miner: Bullish Forward Estimates
Because Newmont Mining ((NEM - Free Report) ) is the largest gold miner, it’s worth looking at the company’s forward estimates. NEM earns a best possible Zacks Rank #1 (Strong Buy) and analysts see healthy, high double-digit EPS growth in the coming quarters.
Image Source: Zacks Investment Research
10. Gold Stocks Enjoy Cheap Valuations
Though many gold stocks are growing rapidly, they remain inexpensive from a valuation perspective. For example, AngloGold ((AU - Free Report) ) has a forward P/E ratio of 11.11x, roughly half that of the S&P 500 Index.
Image Source: Zacks Investment Research
Bottom Line
Volatile global currency markets, geopolitical escalations, and upcoming interest rate cuts are just some of the reasons to be long gold over the next 6-12 months.