Macroeconomic uncertainties, mounting geopolitical tensions and a desire to hedge against inflation have given gold — the classic “safe haven” asset — a blistering rally. Spot gold prices have soared above $2,700 an ounce, rallying for the fifth day on Monday to hit another record high of over $2,733 an ounce. Year-to-date, spot gold is up over 30%. And Michael Widmer, head of metals research at Bank of America, says it has further to go. ‘If gold doesn’t rally now, then I’m not sure when it ever will. Actually, I think the fundamental backdrop looks actually quite good,” he told CNBC’s “Squawk Box Europe” on Monday. He’s one of a number of analysts that expect gold to reach $3,000 an ounce by 2025. Traditionally, higher Treasury yields mean lower gold prices, as investors look elsewhere for interest. But Wider noted the de-correlation of 10-year Treasury real interest rates (adjusted for inflation) and the price of gold. “These days, lower 10-year real rates are bullish gold, but higher 10-year real rates do not have to be bearish gold, and that’s partly because I think there are increasing concerns about government debt levels, particularly when it comes to the U.S. elections, there is very little focus on fiscal consolidation,” Widmer said. As fiscal deficits rise over the next few years, the metals expert described gold as “really attractive.” “It’s almost the ultimate safe haven asset if there’s a lot of concerns about the Treasury market,” he added. ‘Diversification and unique performance’ Principal Asset Management’s Todd Jablonski is also bullish on gold looking ahead. The global head of multi-asset and quantitative investments is overweight on the precious metal for the first time in “25 years of managing other people’s money.” His optimism stems from factors including a steady increase in demand for gold, for example by central banks. “It is one of the few liquid alternatives where we are overweight today, but I do like the diversification and unique performance pattern of the asset class,” Jablonski told CNBC Pro on Oct. 16. “The increased demand we see for gold means that supply is going to have to try to adjust. We all know supply is a bit limited, therefore price action is really the area that I do think you can continue to see gains .” XAU= 5Y mountain Gold John Reade, senior markets strategist at the World Gold Council trade association, warned of volatility ahead, however. He’s cautious about gold in the short-term given that investors’ net-long positions are at a post-Covid high. “I think declining interest rates will be a nice tailwind for the gold market and increase prices over the next six to 12 months. But you could well see volatility in the short-term … driven partly by speculative investors,” he told CNBC earlier this month. “I think people should be cautious about going all-in to gold now, but that doesn’t mean they shouldn’t own it.” Allocating to gold Reade advised investors to always have a position in gold, albeit as a relatively small part of a portfolio. “Equities are always the largest component of a portfolio for most investors. There’s going to be some fixed income to generate yield and to help hedge those equities, but there should also be some gold because it offers unique hedging properties and does well during difficult times while generating a return over the long-term,” he added. When asked what percentage of one’s portfolio should be invested in gold, Reade said it depends on the other investments. “The way to think of how to allocate is – the more equities or industrial metals, [or] bitcoin or crypto you have in your portfolio, the higher the target allocation to gold,” he said, recommending somewhere between 4% and 10%. Principal Asset Management’s Jablonski, meanwhile, said he has less than 5% of his portfolio allocated to commodities, including gold. – CNBC’s Fred Imbert contributed to this report
