Gold will rally to a record next year on central-bank buying and U.S. interest rate cuts, according to Goldman Sachs. The investment bank listed the metal among top commodity trades for 2025. “Go for gold,” analysts said in a note, reiterating a target of $3,000 an ounce by December 2025. The structural driver of the forecast, they explained, is higher demand from central banks, while a cyclical lift would come from flows to exchange-traded funds as the Federal Reserve cuts, they said. An unprecedented escalation of trade tensions could revive speculative positioning in gold, they said. Rising concerns over U.S. fiscal sustainability may also aid prices, they said noting that central banks-—especially those holding large amounts of U.S. Treasuries—-may opt to buy more gold as a hedge against a fall in the dollar.
Gold is up again this morning (November 20) for December delivery on the COMEX by another $17.40 an ounce, or 0.67%, to $2632 an ounce. A move to $3000 would be a gain of 14% from here. That’s only a really attractive potential return if you think that a flood of uncertainty will hit prices of other assets, such as stocks, hard in 2025.
Which I do. My view of 2025 is chock full of uncertainty. So I agree with Goldman’s projected trend. (I can hear the sigh of relief at Goldman.)
But my reasoning is a little different. I don’t see much in the way of interest rate cuts from the Federal Reserve next year. I think that Trump Administration policies will slow economic growth and push inflation higher. Which will have the effect of removing one prop for current high stock market prices. In itself that will add more uncertainty to the financial markets.
But whichever theory of causation you believe, there’s good reason to see gold prices moving higher in 2025.
If you think the overall damage to stock prices will be significant but not terrifying, then I think gold mining stocks are the way to gain exposure to gold. (Significant but not terrifying would be a pull back of 5% to 10% in stock prices.) In my portfolios I hold Barrick Gold (GOLD) and Newmont (NEM). They both have the advantage of paying a dividend a bit over 2%, 2.34% for Barrick and 2.36% for Newmont, so that you get paid something while you wait for the trend in gold prices to work its way back to mining stocks.
If, however, you think the economic and market damage will be worse than that (say 15% to 25%), then I think you should look at gold itself through something like the SPDR Gold ETF (GLD), which I also hold in my portfolios. If stock prices fall scarily enough, shares of gold miners won’t be exempt from the general market damage. Sell everything is generally the first stage reaction. And don’t forget that most gold mining companies produce significant amounts of copper and any economic slowdown will hurt copper prices.
If you aren’t 100% certain about how bad the potential damage will be in 2025, you can go 50/50, initially (and then adjust), on mining stocks and gold itself. That’s what I would in fact recommend until we have a better sense of how much of the Trump agenda will actually be enacted (at the moment I believe close to all of it and quickly) and how the Federal Reserve will shift its monetary schedule in response.
