The gold market is experiencing a significant surge, with projections indicating a potential rise to US$3250 per ounce by the end of the year. VanEck’s Imaru Casanova, a portfolio manager specializing in gold and precious metals, anticipates this increase driven by central banks bolstering their gold reserves as a safeguard against geopolitical uncertainties.

Traditionally, gold has been a safe haven during times of inflation and global instability, with its price climbing 43% over the past year to reach US$2915 per ounce. Casanova highlights gold’s appeal as a hedge against inflation and a diversification tool in investment portfolios, especially in times of economic turbulence.

One notable factor contributing to the recent surge in gold prices is the heightened gold purchases by central banks, particularly following the 2022 Russian invasion of Ukraine. Countries such as China, Turkey, Poland, and India have significantly increased their gold acquisitions, with global central banks collectively buying around 1000 tonnes annually between 2022 and 2024, compared to an average of 500 tonnes in previous years.

Despite the impressive performance of the gold market, gold miners have not fully capitalized on this trend due to various challenges, including escalating operational costs. However, Casanova suggests that exchange-traded funds (ETFs) holding a diversified portfolio of gold mining companies present an attractive investment opportunity, especially as these miners may offer dividends, unlike physical gold.

The VanEck Gold Miners ETF, which includes prominent companies like Newmont, Agnico Eagle, Evolution Mining, and Zijin Mining, is positioned to benefit from the projected rise in gold prices. While miners have faced cost inflation, the surge in gold prices has significantly improved their profit margins, making gold stocks currently undervalued compared to the metal itself.

Looking ahead, Casanova expects gold equities to outperform the metal as the price of gold continues to climb. The VanEck Gold Miners ETF, for instance, recorded a 59.8% return over the twelve months leading up to February 28. This positive outlook on gold prices underscores the potential for a re-rating of gold equities and a promising investment landscape for gold mining companies.

In conclusion, the gold market’s upward trajectory, driven by geopolitical uncertainties and central bank actions, presents investors with a compelling opportunity to capitalize on the projected surge in gold prices towards US$3250 per ounce by the end of the year.