(Kitco News) – Although investor demand for gold has been lackluster through most of 2024, sentiment appears to be changing as skeptics are starting to be convinced, with prices trading near all-time highs and up more than 30% so far this year.
Robert Armstrong, U.S. Financial Commentator at the Financial Times, could be the latest convert to the precious metal, as he noted gold’s appeal in turbulent times during his keynote speech at the 2024 London Bullion Market Association Precious Metals Conference.
“The only gold I own is in these cufflinks that I put on this morning,” he said. “But now I’m thinking it’s time to buy a little bit.”
In a comment to Kitco News on the sidelines of the conference, Armstrong clarified that these are only his personal views on the market and while he does see value in gold, it remains a complicated trade.
“When things are terrible, gold seems to do well,” he said. “That has always been its appeal.”
However, Armstrong added that the downside is that investors need to hold gold for extended periods to benefit during these short-term bouts of fear, uncertainty, and volatility.
As for investing in gold, Armstrong said, in his personal view, it is overvalued and it would be better to buy on dips rather than chase the market.
While Armstrong may be looking for a buying opportunity, he noted in his presentation that the metal’s rally is supported by strong fundamentals as economic and geopolitical uncertainty remains extremely elevated.
He pointed out that there are signs investors are starting to accumulate gold as a liquidity play and a hedge against a market downturn.
Armstrong added that this uncertainty can also be seen in what many have now dubbed the ‘Costco Phenomenon.’ Demand for physical bullion has struggled through 2024 due to high prices, but Costco continues to see robust growth in its bullion products. Last month, in the giant retailer’s earnings conference call, Costco CFO Gary Millerchip said that gold was a "meaningful tailwind" to e-commerce sales in the quarter. The company said its gold sales increased by “double digits” in the third quarter.
Armstrong remarked that this is an incredible trend, especially since Costco doesn’t offer a buyback program for its customers. He added that many customers don’t know why they are buying gold, only that they want it.
“At some gut level, people know that something is off with the economy,” he said. “It’s an interesting indicator of where consumers’ heads are at.”
Looking beyond consumer demand, Armstrong said that central bank demand is also another reason why gold could maintain its current uptrend. He added that it’s not surprising nations are starting to diversify away from the U.S. dollar.
“If you are a central bank and you see the U.S. government trying to turn the screws on another nation’s foreign reserves, you are going to start thinking about alternatives and how to protect your economy,” he said. “I think diversification works for everyone, and after the U.S. dollar, gold is probably the only show in town.”
However, Armstrong also noted that he does not expect the U.S. dollar to lose its reserve currency status any time soon. He added that while the global monetary policy system might see more diversified foreign reserves, the deglobalization trend will not last.
“The real economy has taught us that deglobalization is hard to do,” he said.
Armstrong also noted that fears of a U.S. debt crisis may be exaggerated, pointing out that even with the deficit above $35 trillion, investors are still buying U.S. debt.
“There will come a time when bond buyers will rebel, but I don’t know when that will happen,” he said. “People have been talking about rising debt since the 1980s.”
