(Kitco News) - In keeping with the price action over the past year, the gold market has experienced a relatively shallow and brief correction, with prices holding initial support around $3,300 an ounce.
While gold remains sharply down from last month’s high, one investment firm says the rally is far from over and that there is still real value in the precious metal, even at current prices and after the gains seen over the past 12 months.
In a report published earlier this month, Imaru Casanova, Portfolio Manager of the VanEck Gold and Precious Metals Fund, said that in this new consolidation period, gold appears to be building a solid base above $3,000 an ounce. She added that the current pullback from last month’s all-time high of $3,500 is neither surprising nor a major concern.
Casanova noted that the broader investment market continues to largely ignore the precious metal, despite its significant gains over the past two years—prices rallied 27% last year and are up 25.5% this year. While investment demand has picked up significantly in recent months, Casanova said that only about 1% of global assets under management are currently allocated to the gold sector.
“Investment demand remains well below prior peaks,” she said. “When investors return to gold in a meaningful way—and we believe the case for doing so is growing—the combined force of renewed investment flows and continued strong central bank buying could drive prices significantly higher. Based on historical correlations between ETF holdings and the gold price, a return to 2020 peak ETF levels could translate to an additional $600 per ounce increase. In our view, it’s not too late to begin building or adding to a position in gold or gold equities.”
For investors just starting to build a position in gold, Casanova recommends creating a strategic allocation of around 5%. “We do not recommend trading in and out of this core position,” she said.
As for how far gold’s rally could go, the commodities team at VanEck said in a separate report that they see gold prices pushing to $4,000 an ounce in 2025.
“Gold is well-positioned to continue its rally, especially as more Western investors return to the market. The ongoing uncertainty surrounding tariffs, along with continued inflationary pressures and geopolitical risks, are likely to further bolster gold's appeal as a hedge against market volatility,” the analysts said.
VanEck added that investors should not view gold solely as a short-term bet; the analysts see potential for prices to hit $5,000 an ounce within the next five years. They noted that over the long term, gold has outperformed traditional asset classes over the past 20 years.
“The investment outlook for gold remains positive, with expectations of continued strength in the market,” the analysts said. “Factors such as ongoing geopolitical risks, trade policy uncertainty, and sustained inflationary pressures are likely to further enhance gold's attractiveness.”
