Gold (XAUUSD) reached $2,600 an ounce on Monday, recovering after a week of record declines in 2021 as the U.S. dollar stabilized. The latest U.S. data show that retail sales rose more than expected in October, revealing the strength of the economy.
Last week, comments by some Federal Reserve officials added uncertainty about possible rate cuts and their timing. At the moment, markets estimate about a 65 percent probability of a 25 percent rate cut in December.
Investors now focus on upcoming statements by other Fed policymakers during this week, hoping to get clearer indications of the direction of interest rates in the United States in the coming months.
After the Republican candidate's victory in the presidential election, investors rushed to Wall Street to put their money in various assets, such as stocks (S&P 500) and Bitcoin (BTC/USD), which has soared to an impressive 90,000.
However, there seems to have been one asset that did not benefit from this celebration: gold. The price of spot gold fell by 6.44 percent. This decrease can be attributed to the fact that gold-usually considered a safe-haven asset is not particularly attractive when Trump's tax cut and tariff policies promise to stimulate the Wall Street stock market.
Currently, the market seems unconcerned about U.S. credit risk. If excessive fiscal deficits or loss of independence were a real
Gold prices have fallen significantly recently, but we expect a stop to this trend soon. Our target of $2850 in the short term remains valid.
There are several options for investing in gold. One can opt for a euro ETF to protect against currency risk or choose a dollar ETF. Another interesting alternative is to buy a share in a gold mining company.
One of the most interesting sectors is gold mining, particularly Newmont (NYSE:NEM). Currently, Newmont's value is significantly underestimated at $45 per share, considering the scenario of a significant increase in the price of gold by 2025. With its vast gold reserves, low production costs, solid balance sheet, and high dividend yield, we believe the current price is an excellent entry point for investors.
Based on the company's historically low P/E ratio, we suggest that there may be a 50 percent discount to its potential long-term value, with a price target between $90-100 per share over the next 18-24 months.
The recent election has only confirmed my concerns about a dramatic increase in inflation rates next year. This will put a strain on foreign investors, international central banks, hedge funds and other large investors who will be looking for safe hedging.
In addition, as demand for and supply of gold (and also silver and platinum) grows and dwindles, the precious metal will be increasingly in demand as a “store of value” and “safe currency,” likely driving prices well above $3,000 an ounce in 2024.
During Trump's first term, which ran from January 2017 to January 2021, investors who owned gold and Newmont stocks reaped significant benefits.
With tax cuts, the Fed's growth in money printing, and the adoption of trade tariffs, the perfect combination to encourage safe gold-related investments has repeated itself. And this scenario could well repeat itself in the future.
At the geopolitical level, current tensions in the Middle East and the escalating conflict between Ukraine and Russia could lead to an increase in safe-haven assets, providing further support for the gold price. In addition, with the continued risk of conflict between Taiwan and China, gold prices could exceed $4,000.