Looming U.S. stagflation and gold’s record of multi-year bull runs mean there’s still plenty of price upside – Fidelity’s Samson
AdamSummary:
Fidelity’s Ian Samson sees gold’s multi-year bull run continuing, driven by looming U.S. stagflation, sticky inflation, Fed rate cuts, deficits, and global reserve diversification. He says gold remains the ultimate safe-haven asset.
Even though gold prices have posted outsized gains over the last couple of years, gold bull markets often last many years once they get going, and with a strong chance of U.S. stagflation on the near-term horizon, investors have no reason to reduce their positions, according to Ian Samson, multi-asset portfolio manager at Fidelity International.
Samson wrote in a research note that gold has earned its popularity among investors.
“It was one of the best performing assets in our portfolios last year, rising 27%, and it’s already up another 28% this year (to 25 August),” he noted. “Despite this, bullish environments for gold can run strongly for many years. Gold continues to provide diversification even when bonds do not, maintains an ultimate ‘safe haven’ status, offers protection against inflation and loose economic policies, and benefits from structural trends.”
Samson said Fidelity’s base case calls for “a US slowdown or even stagflationary environment” in the coming months, and the financial giant is retaining their positive outlook for gold prices. “The Federal Reserve is set to lower interest rates, despite inflation still around 3%, and with tariffs likely to keep prices elevated,” he wrote. “The tariff hit and a slowing labour supply will also lead to a weak growth environment.”
“This mix of falling interest rates, sticky inflation, and subdued growth should all bolster gold,” Samson said. “It should lead to a subdued US dollar, which is gold’s main competitor as a safe haven and store of value. We have never seen this scale of uncertainty and change around tariff policy, and the effects are yet to dissipate. Gold’s status as the ultimate ‘safe haven’ leaves it well placed for any further surprises.”
“In addition, the unrelenting size of the US budget deficit raises concerns about monetary debasement, which further boosts the long-term case for gold,” he added.
Samson said the structural argument for gold investment also remains strong. “Foreign reserve managers are still buying, and global gold ETF holdings continue to increase,” he said. “Multiple countries, including China, India, and Turkey are structurally increasing their holdings of gold, in a bid to diversify exposure away from the US dollar. Gold has long been a store of value and a diversifier, without the credit risk associated with paper currency reserves. More broadly, gold supply is very constrained, meaning even a small increase in portfolio holdings could move the dial. For instance, if foreign investors decide to move some of the 57 trillion US dollars they currently hold in US assets, gold is a likely beneficiary.”
Samson said that Fidelity International remains “happy to hold gold in our well-diversified multi-asset portfolios.”
“For much of the year this had been through a combination of passive instruments that track the gold price directly, and through a selection of gold miner equities,” he added. “The latter has outperformed in the last few months and we have taken the opportunity to book some profits, but retain exposure to the gold price.”
Gold is still holding comfortably above the $3,400 level on Thursday afternoon after hitting a session high of $3,423.18 per ounce just before 4 pm EDT.
Spot gold last traded at $3,419.82 per ounce for a gain of 0.65% on the daily chart.
Source: kitco
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