(Kitco News) - Some weeks, it is tough to be a gold investor. Although prices are holding above $2,000 an ounce, the price action is uninspiring for many. The only good thing someone can say about gold is that it’s doing better than the mining sector, but that is not a major bar to climb after shares in Newmont, the world’s biggest gold producer, fell to a five-year low this week.
It’s difficult for gold to shine as investors are blinded by the brilliance of the tech sector, which is driven by advancements in Artificial Intelligence. The AI sector generated significant profits for Nvidia (Nasdaq: NVDA) in the final quarter of 2023. Thursday, the chip maker reported revenue of $22.10 billion for its fiscal fourth quarter, a rise of 265% year-on-year; at the same time, net income surged 769%.
Nvidia is single-handedly driving the tech sector, propelling the S&P 500 further into blue-sky territory as it looks to end the week just below 5,100 points. In our new era of FOMO, it takes incredible fortitude not to liquidate your gold holdings and use that liquidity to chase the equity market and magnificent seven.
However, some analysts have pointed out that the best time to buy insurance is when you don’t need it. Although U.S. economic activity remains robust, some analysts have said the threat of a recession remains prevalent, especially as the Federal Reserve remains reluctant to cut interest rates.
It’s not just red hot momentum in equity markets that gold investors have to compete against; it’s also growing interest in Bitcoin. Last week, we noted that the debate between gold and Bitcoin continues to grow and is growing even louder. Kitco’s Jordan Finneseth pointed out that some investors are arguing that Bitcoin has a greater claim to be part of a 60/40 portfolio, than gold.
However, there are fund managers like Charlie Morris from ByteTree who bring some common sense to the debate, highlighting the role of both. “In 60/40, gold is in the 40 as it’s a risk-off asset. Bitcoin is in the 60 because it’s risk-on. Always structural demand for interesting hedges in the 40,” he wrote in a comment on social media. “Gold and bitcoin are not [in] competition, or at least shouldn’t be.”
Meanwhile, although investors continue to ignore gold, central banks continue to be stoic buyers. Commodity analysts at ANZ said that central banks are buying to make up for recent losses in their bond holds as inflation has pushed U.S. interest rates to their highest level in more than four decades.
The Australian bank expects central banks to be significant gold buyers for at least the next six years.
“[Emerging market] central banks could purchase over 600 tonnes of gold annually until 2030, to take its share in their foreign reserves to 10%. China will likely occupy the lion’s share in global official gold demand,” the analysts said.
That is it for this week. Have a great weekend
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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