Gold prices have been on a steady rise in 2024, reaching new record highs above US$2,600 per ounce after the US Federal Reserve’s interest rate cut. This surge has garnered attention, but gold stocks have not matched the metal’s performance, leaving investors pondering the right time to invest.
Experts interviewed by the Investing News Network (INN) shed light on the situation. As of October 1, gold prices had risen by around 30 percent for the year, while popular gold stock exchange-traded funds like the VanEck Gold Miners ETF and the VanEck Junior Gold Miners ETF had seen gains of about 32 and 33 percent, respectively. Despite these gains, market expectations for gold equities to outperform gold itself have not been met.
John Kaiser of Kaiser Research explained that the movement seen in gold stocks aligns with typical patterns in a gold bull market, with major gold miners responding positively to rising gold prices. He noted that intermediate gold companies have also shown significant gains, signaling a positive trend for juniors in the sector.
Adrian Day of Adrian Day Asset Management highlighted gold stocks’ historical performance during US recessions, emphasizing their outperformance compared to the S&P 500. He suggested that amidst economic uncertainties, gold stocks could offer a safe haven for investors, especially in anticipation of a recession or stagflationary period.
Don Durrett of GoldStockData.com predicted a gold price range of US$2,600 to US$2,700 by year-end, attributing this forecast to a potential US recession. He emphasized that as the US economy faces challenges, foreign investors may shift funds to gold, driving both prices and gold stock investments higher.
While gold stocks have shown some response to the rising gold price, experts believe that a key missing element for stock movement is the absence of generalist investors in the sector. John Kaiser suggested that geopolitical tensions and potential election outcomes could serve as triggers for increased interest in gold and related stocks.
Despite gold stocks not yet outperforming gold, experts remain positive about the sector’s outlook. They view current valuations as attractive entry points for investors, especially given ongoing economic uncertainties. Market participants are advised to conduct thorough research before diving into the sector, as the involvement of generalist investors could significantly impact stock momentum.
Overall, while gold stocks may not have fully capitalized on the rising gold prices, the sector holds promise for investors seeking exposure to the precious metal amid evolving market conditions.
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