(Kitco News) – Falling rates, high uncertainty, the weakening dollar and the crypto pullback are all contributing to a very strong setup for the next phase of the gold rally, according to Sameer Samana, head of Global Equities and Real Assets at Wells Fargo Investment Institute.
In a Wednesday interview with Kitco News, Samana said that the multi-year gold price rally remains intact.
“Nothing is damaged with respect to the uptrend,” he said. “Now, that doesn't mean that you couldn't have some further consolidation. It's entirely possible that the Fed at the December meeting – we think they'll cut – but it's possible they wait until January. But either way, they will be cutting.”
Samana said the Fed will become more dovish as Trump continues with his appointments, particularly when Powell’s successor is named, which could be as early as December. “Right now it looks like Kevin Hassett is a front runner,” he said. “Obviously markets will start paying more and more attention to his commentary, which I imagine will probably end up looking a lot like Governor Miran's commentary, and he'll probably want rates somewhere down in the twos.”
He said this will reduce one of the main headwinds for gold: the opportunity cost of holding a non-yielding asset. “As rates come down, especially real interest rates, that’ll put a little bit of a bid under gold.”
Samana said it will likely also lead to another round of weakness in the U.S. dollar.
“[The dollar index] fell almost 15% from 110 all the way down to 96, and, you've only been able to manage a 3% to 4% rally. That's very negative, the fact that the dollar fell that far and fast. The dollar over the next 12 to 15 months, probably starts to stall out, or at the very worst for gold, goes sideways,” he said.
“We don't see a lot of dollar strength from here.”
Samana is also seeing an ongoing and broad-based diversification trend across markets, which he believes will further boost gold prices.
“In this world where there's a lot of uncertainty, people are looking more and more for sources of diversification that maybe bonds used to provide,” he said. “It seems like gold is the key diversifier in a world where inflation remains perky and the Fed cuts rates with inflation at 3%.”
Another factor that Wells Fargo sees boosting gold prices going forward is a relative weakening of some of the yellow metal’s strongest competitors: AI-led equities and crypto.
“I think a lot of the flows into the U.S. were due to higher interest rates, relative stability in an uncertain and unstable world,” Samana said. “You could also argue the AI’s performance was a big part of the reason why people would turn other currencies into dollars and turn around and buy those equities. But a lot of those have either been rolled back or weakened.”
“AI now is a global play,” he added. “You're almost as likely to buy Taiwanese equities, or Korean equities, or Chinese equities as you are U.S. [equities], because things have shifted in terms of what's being built out with respect to AI. You could argue that the U.S. now is almost as uncertain a place to invest as some other developed markets, given some of the political changes.
Samana believes global equities – and AI equities in particular – are too closely correlated to deliver true diversification.
“I think investors are saying, ‘Look, there's just so much tail risk that's so hard to quantify, it can't be the old playbook of just buying equities in various parts of the world. It has to be something non-equity like.’”
For much of gold’s ongoing rally, Samana said crypto was also attractive from a diversification and performance standpoint, but that’s no longer the case. “I think Bitcoin filled that niche, but in this most recent kind of six to 12 months, even that's falling back. It really does seem like it's gold that's stood the test of time.”
One other metric that Samana thinks is flying under the radar is that gold has actually been outperforming the hot stock market for years now.
“I think what's really interesting is, if you look at the S&P in gold terms, we peaked in late 2021,” he said. “You're now four years into a relative trend of stocks versus gold. I think that's lost on a lot of people.”
“We sometimes have a difficult time getting people to allocate to commodities,” Samana said. “What I would tell people is, at a high level, the whole complex is a great diversifier, [but] if you zoom in to the gold piece of it, it's been a really strong performer – and again, over a not-insignificant amount of time now.”
In September, Samana told Kitco News that Wells Fargo expected most risk assets would deliver a very strong performance over the next 12 months.
“I think what's really interesting is just how good the environment is for all risk assets, across the board,” Samana said. “Rarely have you had a Fed start to actively consider cutting rates when inflation has been this far above their target of 2% – running at 3% and bottoming out – and they're talking about cutting rates.”
“Clearly their focus is shifting from inflation to the labor market,” he added. “For high-quality risk assets, I think it means game on.”
Samana said this renewed investor appetite is being reflected in the equity markets – and also in gold prices. “It's becoming harder and harder to make a bear case for really anything other than bonds, given this pivot by the Fed.”
And even with Wells Fargo projecting that the labor market will continue to weaken and economic growth is expected to slow through early 2026, he believes the market has already discounted the poor performance, and equities will see a smaller secondary pullback at the worst.
“The market tends to run ahead of the economy, and the fact that we had a pretty big drawdown in Q1, almost a bear market, already accounts for some of the negative impacts of trade and tariffs, which is why we'll see the soft patch in Q4 and into the first part of ’26,” he said. “I would argue five to seven percent, maybe 10%, but nothing like we saw in the first half.”
“[Equities] will probably find their footing somewhere in that seasonally strong fourth quarter period, whereas the economy might not find its footing until the first quarter, maybe the second quarter of 2026.”
Samana said the case for gold is structural.
“If the Fed's going to start cutting interest rates and focus on the labor market with inflation at 3%, they're basically throwing bondholders under the bus,” he said. “Bonds are going to be under pressure, and they're not going to be the typical diversifiers, because they struggle to be good diversifiers in a high-inflation environment. Then people need to look elsewhere for diversification, and gold seems to be the easiest alternative, because it does well in uncertain times. For individuals, I think it's a diversification aspect that historically tended to be more tied to bonds.”
“Then on the central bank side, on the institutional side, there's the ‘diversification away from the dollar’ aspect, where obviously the new administration is doing things very differently than the previous administration – although you could argue that gold purchases started in earnest somewhere around 2022 with the Russia sanctions around Ukraine,” Samana said. “So it's just a continuation of that, where central bankers around the world are rethinking how much money they want tied up in U.S. dollar assets.”
“And two, if all these countries are going to be thinking about their economies first and fiscal discipline second, it's probably going to be very inflationary.”
