(Kitco News) - The gold market continues to benefit from a drop in U.S. bond yields and the U.S. dollar, with prices trading near a three-week high above $2,750 an ounce.
The yellow metal is starting the year on solid footing, with prices up 5% in the first month. One fund manager expects the precious metal to remain in a long-term uptrend even as it experiences short-term volatility.
Looking beyond the short-term risks as the Federal Reserve signals a shift in its easing cycle, Ryan McIntyre, Managing Partner at Sprott Inc., said in a recent interview with Kitco News that he remains a long-term gold bull. This stance is based on governments worldwide continuing to debase their currencies through rising debt levels.
“From an uncertainty standpoint, that's probably the biggest wild card for the global economy, which is obviously positive for gold,” he said.
McIntyre’s outlook comes as the U.S. Treasury has already resorted to extraordinary measures due to government spending reaching its debt limit. Before the summer, Congress will have to raise the debt ceiling or face another government shutdown.
McIntyre noted that this economic uncertainty makes gold an attractive safe-haven monetary asset. He added that this is a significant reason why gold has rallied to critical resistance levels, even in the face of higher bond yields.
Ryan explained that while higher bond yields increase gold’s opportunity costs as a non-yielding asset, investors are starting to recognize the greater value of protecting their wealth.
“I'd be way more worried about losing large sums of money in some sort of fiscal calamity than relatively minor sums in ‘opportunity cost,’” he said.
Ryan added that the likelihood of such a “calamity” in the global economy is relatively high as the Federal Reserve continues to balance its monetary policy on a tightrope. Stubborn inflation is forcing the U.S. central bank to maintain a restrictive monetary policy stance. However, higher interest rates are expected to slow economic activity.
In his inauguration speech, Trump outlined his plan to usher in a new golden age of economic growth for America. However, many economists have noted that some of Trump’s proposals, such as extended tax cuts and trade tariffs to support domestic manufacturing, are inflationary.
“There are a lot of pro-growth strategies being talked about, but they are not without risks,” McIntyre said. “I expect that, because of all this uncertainty, investors will be recalibrating their risk appetite a little bit.”
In this environment, McIntyre said he prefers holding 10% of his portfolio in gold as a fixed position. Due to current market conditions, with equity markets near record valuations, he said it also makes sense to overweight the precious metals sector with an additional 5% allocation to mining equities.
“If gold sees another positive year, the miners will outperform,” he said.
As for 2025 price targets, McIntyre said he isn't interested in tracking year-end prices. However, he remains bullish on gold.
“The only thing I am interested in is where gold is going long-term,” he said. “I expect that, in 10 years, gold will significantly outperform the S&P 500.”
