Gold’s glittering run has added some shine to investment portfolios despite the recent correction in the S&P 500. With the precious metal surging past $3,000 per ounce, questions linger as to whether it’s too late in the game to pick up a few bars, bullion ETFs, and gold-mining stocks or wait for a bit of a pullback after the most recent melt-up on the back of rising economic and geopolitical unknowns.
As gold surpasses the price targets of many, the big question is whether it’s time to raise the bar or take profits where there are profits to be had. In any case, I think gold’s recent outperformance relative to markets and even Bitcoin further bolsters the case for holding a portion of gold in your portfolio. Undoubtedly, the magic percentage for one’s nest egg could range anywhere from 1-10%.
In this piece, we’ll dig into gold’s hot run, where the asset could go next, and the best ways to play it.
Gold shines as stocks lose their luster
Buying assets at or around their all-time highs can feel like chasing or even speculating. However, unlike stocks, gold has no intrinsic value, making it virtually impossible to make near-term price predictions. That’s why I’m only a fan of gold if you’re only getting in to play the long game (a multi-year time horizon) and you want exposure for the sake of better diversification. At the end of the day, it’s a proven diversifier that can do more heavy lifting when stocks sag.
For those seeking a hedge (against many things, including inflation), I still believe it makes sense to add to your gold exposure. Ultimately, gold is a lowly correlated asset that can help stabilize your portfolio when things get really nasty.
However, investors should also be aware of the downside risks that few discuss when it comes to an asset that’s widely viewed as a “safe” store of wealth. Gold can have bear markets, too, and over extremely long periods of time, stocks have been the better-performing asset class. That’s why long-term investors heavy in stocks should be in no rush to back up on gold if returns (rather than stability) are what they’re looking for.
Over the past year, SPDR Gold Shares (NYSEARCA:GLD | GLD Price Prediction), a top gold ETF, have gained just shy of 40% compared to the 8% posted by the S&P 500. As central banks around the world add to their reserves, demand for the metal could stay robust for some time. Add mounting geopolitical uncertainties and rate cuts into the equation, and things could stay bright for gold through 2025.
Where could gold be headed next?
Bank of America (NYSE:BAC) nailed it when they predicted gold would hit $3,000 per ounce just last year. They referred to the asset as the “ultimate perceived safe haven,” and it’s hard to make a case against that. Looking to the year ahead, Citigroup (NYSE:C) foresees $3,200 per ounce as possible within the next three months, representing a swift gain of more than 8% from current levels.
Though gold can be tough to trade, I do think the current bull run may have legs to run into year’s end, especially if the Trump tariffs keep coming and they stick around long enough to plunge the U.S. economy into a recession. As the Fed cuts rates as many as two times this year, inflation may be tougher to control, and “stagflation” could arise, further solidifying the case for holding gold.
As the melt-up continues, I wouldn’t dare bet against the asset, especially given its remarkable resilience amid the latest correction. Perhaps it’s not too hard to imagine many rattled investors are ditching stocks for gold right here. As to whether they’re chasing too hot of a run remains the big question.
In any case, I think investors seeking a “cheaper” way to play the asset should check out the gold miners. The VanEck Gold Miners ETF (NYSEARCA:GDX) stands out as a great way to bet on the broad basket as they look to gain ground en route to all-time highs now seen in over a decade.
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