Blanchard Index

Precious Metals

The price of gold surged on ideas the longest U.S. government shutdown in history could soon end. On Nov. 10, the Senate passed a temporary funding measure, which moves to the House of Representatives. Investors believe a reopening of the government will ensure delivery of government data that will boost odds of a Federal Reserve interest rate cut in December. Currently, Wall Street sees a 67.4% chance of a 0.25% rate cut in December, according to CME FedWatch. Gold historically attracts fresh inflows as interest rates move lower.

Gold climbed back above $4,100 as dip buyers emerged to support the precious metal on the recent pullback to the $4,000 area. Wall Street views the recent pullback in gold as a “momentum flush” which saw short-term traders taking profits on the historic record setting rally that took the precious metal to a record high at $4,373.20 on Oct. 16. The long-term trend in gold still points higher.

In fresh news, Tether Holdings SA, a powerhouse cryptocurrency firm, hired two of the world’s most experienced precious metals traders to help build a vast physical gold reserve. The move further cement’s gold’s place as a safe-haven currency even in today’s digitally driven world. Tether currently owns more than $12 billion of physical gold bullion and has been adding to those holdings at an average of more than one ton a week over the last year, Bloomberg reported.

Investors big and small, institutional, and retail are turning to physical gold to hedge against a devaluation of fiat currency amid rising government debt and to protect and grow wealth in a time of stock market volatility and inflation. Major banks including Bank of America, Goldman Sachs, HSBC, and Société Générale expect gold to climb to $5,000 in 2026. The private bank division of JPMorgan forecasts a high of $5,200 or $5,300 by the end of 2026.

Key Takeaway: The major drivers which support the long-term uptrend in gold remain intact, with more upside in gold ahead in 2026.

Here is what analysts at Wells Fargo Investment Institute had to say in Nov. 10 research note to clients:

“Has there been any change in the bull market story? No. Gold remains the outlet for investor concerns over government debt, geopolitical risks, economic uncertainty, inflation, among other factors, while central bank and investor demand should remain robust. We expect that the gold bull run is not over and forecast that price will reach $4500 – $4700 (per troy ounce) by year- end 2026.

What happened the only other time in modern history that gold was similarly stretched above its 200-day moving average? The year was 2006. Gold peaked, pulled back, and then consolidated for a few months before continuing its secular bull run — gaining another 230% over the next five years between that 2006 low and the bull peak in 2011. If history does not exactly repeat, will it rhyme this time around?”