(Kitco News) - Gold’s ability to outperform equities during a massive financial market sellofff highlights the potential of this “sleeping giant,” according to one market analyst.
North American equity markets suffered a significant blow on Monday as global investors offloaded tech and AI-related stocks following China’s announcement of a cheaper artificial intelligence model, challenging the dominance of U.S. technology.
Reacting to the broad market price action, Michele Schneider, Chief Strategist at MarketGauge, told Kitco News that it’s not surprising gold is holding its ground.
“Gold never seemed to believe that AI would change the economic conditions, including the current deglobalization trend,” she said.
However, Schneider cautioned that investors need to pay attention to ongoing market conditions. If there is a larger rotation into defensive stocks like staples and healthcare, it could signal a recessionary warning, which might weigh on gold due to broader market liquidity risks.
The market’s price action following Monday’s chaos aligns with Schneider’s broader view of the markets this year. In an interview conducted before Monday’s selloff, Schneider emphasized that, amid so much uncertainty, investors need to let price action dictate the narrative.
While Schneider remains bullish on gold this year, she noted that the price must break above $2,800 an ounce to solidify its momentum. Her comments come as gold has climbed back above $2,750 an ounce, a critical near-term support/resistance level. The next major milestone is $2,800. She described gold as a "sleeping giant."
“From a technical standpoint, you cannot deny gold’s bullish case, as it has been outperforming the SPY. But we need to recognize that price will dictate the narrative. I would like to see gold break $2,800; if it does, it could easily reach $3,000,” she said. “Right now, gold is already signaling strength. There’s no reason to think it can’t go much higher. However, I don’t think speculators will return until gold’s price action proves itself.”
In addition to gold, Schneider is optimistic about silver, with prices having rebounded above $30 an ounce.
In her 2025 outlook forecast, Schneider suggested that silver could reach record highs this year.
“While silver begins 2025 above $27 per ounce, we foresee a move similar to the one in 2010, with silver rising to $50 by next September,” she wrote.
While investors wait for gold and silver to gain stronger narratives, Schneider said the marketplace's potential is clear as the global economy grapples with significant geopolitical uncertainty and rising inflation.
“Gold is doing what it does best right now—it’s just waiting. We’ve seen this pattern repeatedly. Although patience is required, gold remains in a solid uptrend,” she said. “At some point, gold’s price will shape the narrative. Once the price hits a certain level, people will start asking questions: ‘Should I be concerned about the deglobalization trend? Should I worry about the inflationary impact of some Trump-era policies?’”
While gold will remain a critical safe-haven asset for hedging against geopolitical uncertainty, Schneider noted her preference for silver as a hedge against inflationary risks continues to grow.
Although the Federal Reserve is looking to shorten its easing cycle due to rising inflationary pressures, Schneider said there is little the central bank can do. She explained that much of the inflation is supply-driven.
Schneider highlighted that food prices are rising globally due to weather-related supply disruptions. At the same time, the supply of copper, silver, and other critical minerals cannot keep pace with the world’s growing energy demands.
“Once silver breaks through $32, it could actually start to outperform gold,” she said.
