Gold has room to run as sentiment is optimistic but not euphoric

(Kitco News) - Gold and silver could be in one of the quietest bull markets in history, as even some of the top analysts don’t fully understand how prices have rallied above $2,700 and $33, respectively.

At least that was part of the sentiment during the London Bullion Market Association’s (LBMA) 2024 Precious Metals Conference in Florida. While analysts may not fully comprehend who exactly is buying gold at record highs, the last thing they are going to do is look a gift horse in the mouth. At this point, investors are simply happy to ride the rally as long as it lasts, and it could still climb much higher.

The best way to describe sentiment at the LBMA was optimistic, but not overly bullish. I only heard one estimate for prices to push above $3,000 an ounce before the end of the year.

The delegates themselves see prices rising to $2,941.40 an ounce by this time next year. This forecast represents a 10% rally from current prices; however, it’s still shy of the $3,000 mark.

At first glance, this may not sound particularly encouraging; however, it demonstrates that even at record highs, this market still has plenty of upside potential. I’d be more concerned if we were in a manic, euphoric stage, as that traditionally signals a market top.

At the same time, although delegates are cautious amid the current rally, nobody is looking to the downside. It’s difficult to be bearish when there is significant fundamental support that continues to grow.

While the upcoming U.S. election could represent a peak in geopolitical uncertainty, it doesn’t mean that sentiment will cool off immediately. Analysts noted that gold could be catching a bid right now as Donald Trump’s prospects of becoming the next U.S. president improve. During the LBMA, analysts pointed out that a Trump administration—whether viewed as good or bad—represents the biggest risk, as the candidate’s positions on foreign policy are unpredictable at best.

Meanwhile, analysts also mentioned that even if Kamala Harris wins the election, geopolitical uncertainty will remain elevated, as it’s unlikely that peace will break out around the world.

They also noted that neither candidate has promoted any policies to address the nation’s growing national debt, which has now surpassed $35 trillion. Even economists at the International Monetary Fund (IMF) are sounding alarms about rising global debt.

In this environment, it’s not surprising that investors are looking to protect their investments and purchasing power. While we don’t know exactly who is buying gold, we do know that there is an important sector that sees the value in the precious metal.

One of the most well-attended discussions during the LBMA conference was with representatives from three central banks. Representatives from the Czech National Bank, the Central Bank of Mongolia, and the Banco de México provided a frank discussion on why they hold gold.

All three panelists noted that gold is an important diversifier in their foreign reserves, and they expect central banks to continue buying gold.

Although the U.S. dollar is not expected to lose its status as the world’s reserve currency, the monetary system is becoming multi-polar. This shift means that gold, with no counterparty or third-party risk, will remain an important monetary asset for the foreseeable future.

While we focus heavily on gold, let’s not forget about silver. Delegates at the LBMA expect the white metal to outperform gold through 2025.

The quote of the conference belongs to Matt Watson, Founder and President of Precious Metals Commodity Management, who said about silver: “I don’t see any fundamental downside to silver.”

That’s it for this week. Have a great weekend.