Gold Shines as the US Dollar is Being Treated Like Monopoly Money – abrdns Robert Minter

The gold market continues to consolidate near its record above $2,750 an ounce. Despite the precious metal’s 33% rally so far this year, one analyst says this is still the calm before the storm, and now is the time for investors to be overweight in commodities, specifically gold. 

In a recent interview with Kitco News, Robert Minter, Director of ETF Strategy at abrdn, advised that investors should ignore potential short-term market volatility and focus on the bigger picture: interest rates are heading lower. 

At the same time, lower interest rates and stubborn inflation pressures mean that real interest rates could fall faster than some expect. Minter added that, in this environment, investors should be overweight in commodities, with a specific allocation to gold. 

Minter noted that traditionally, this environment has been favorable for gold, yet many investors are still choosing to sit on the sidelines. He pointed out that underwhelming investor interest is one of the biggest bullish factors he sees supporting long-term gold prices. 

Minter highlighted that through 2023 and most of this year, institutional and retail investors have been liquidity providers, as they have sold their gold-backed exchange-traded funds (ETFs). He explained that the market was able to absorb the excess liquidity because central banks have been on an unprecedented buying spree. 

Although central bank demand has slowed, Minter said that investor demand has started to shift, with gold-backed ETFs seeing inflows for the year. 

“That dynamic where the traditional supplier of liquidity, ETF gold sellers, is gone, and these investors have actually become liquidity takers. This new market dynamic will be transformative,” he said. “It’s very rare to have structural tailwinds with falling interest rates alongside such low positioning in the marketplace. It just demonstrates how much potential there still is.” 

Minter added that it is not surprising investors are starting to pay attention to gold as they seek to protect their purchasing power from rising inflation, which is partly caused by reckless government spending. 

After a long campaign season, Americans will head to the polls next week to vote for a new President. Despite all the rhetoric, Minter said it is clear that both former President Donald Trump and current Vice President Kamala Harris regard the U.S. dollar as valuable as “Monopoly money.” 

“Regardless of who wins, both candidates have been ignoring the basic laws of economics,” he said. “Both will be fiscally irresponsible.” 

In a world drowning in debt, Minter said he expects a Democratic sweep to be the most bullish for gold, as a full sweep of Congress and the White House would likely usher in a new round of government spending. 

While rising debt and consumer prices will continue to support gold prices through the last two months of the year and into 2025, Minter noted that the precious metal is more than just an inflation hedge. 

Minter said he is also bullish on gold because a new U.S. President is unlikely to ease global tensions. 

Looking to year-end, Minter said he could see gold prices trading around $2,800 an ounce, slightly higher than current prices. He added that the market could easily reach $3,000 an ounce in 2025. 

“If we get the level of rate cuts the bond market is pricing in, and rates are 200 basis points lower by next year, then it’s not unrealistic to see gold prices at $3,000 an ounce,” he said.