Gold has had a remarkable year, with a year-to-date surge of 28%, slightly outpacing the S&P 500’s impressive performance. This rise has not only reinforced gold's reputation as a reliable hedge against inflation and geopolitical instability but has also elevated the outlook for key players like Hochschild Mining on the London Stock Exchange.
From its October 2022 price of $1,570 per ounce, gold peaked at $2,790 in October 2024 before retreating to $2,650. The dip followed a rise in US Treasury yields, which dampened the appeal of holding non-yielding assets. Despite this, UBS Global Wealth Management predicts a bullish 2025, forecasting that gold will hit $2,900 by year-end.
Key Drivers for Gold's Momentum
UBS cites several factors underpinning its optimistic outlook:
Falling Interest Rates:
The Federal Reserve’s monetary easing is reducing the opportunity cost of holding gold. With another 0.25% rate cut expected shortly and further reductions likely, lower rates should continue to support gold prices.Weaker US Dollar:
A softer dollar due to declining rates and mounting concerns over US government debt is expected to make gold more attractive for non-dollar investors, enhancing global demand.Geopolitical and Economic Uncertainty:
Persistent uncertainty surrounding the Russia-Ukraine war, instability in the Middle East, and the unpredictable economic policies of the US president-elect are boosting gold’s role as a portfolio hedge.Central Bank Accumulation:
Central banks remain steadfast buyers of gold, with October marking the highest monthly net purchases of 2024. UBS expects global reserves to grow by 982 metric tons this year and another 900 metric tons or more in 2025, driven by de-dollarisation efforts.
Gold's Role in Diversified Portfolios
Gold’s appeal as a strategic asset has increased in the current environment, with exchange-traded funds (ETFs) attracting inflows as investors seek hedges against volatility. Additionally, its performance complements the longer-term appeal of other metals like copper, which is benefitting from the transition to renewable energy and electric vehicles.
Market Impacts: Hochschild Mining Shines
The rally in gold has buoyed London-listed stocks such as Hochschild Mining, whose shares have doubled to 217p. The company’s strategic moves, including the start of commercial production at its Mara Rosa mine in Brazil, have positioned it as a standout performer in the FTSE 250. Analysts at Peel Hunt have reaffirmed a price target of 280p, with potential upside to 450p if key projects like Monte do Carmo come to fruition.
A Golden Horizon
The confluence of favourable monetary policies, geopolitical uncertainty, and de-dollarisation trends suggests that gold's ascent may be far from over. As UBS anticipates, new record highs could be within reach in 2025, reinforcing gold's position as an indispensable component of diversified portfolios and a beacon of stability in turbulent times.
Share this post