In 2026, gold has been a tough trade to time right, falling from a 10-year high over $5,300 an ounce that it reached early in the year by as much as 18%, according to Goldprice.org. But last week was the precious metal’s best week since January, while gold mining stocks had their hottest five-day run since 2008. With volatility in the gold trade leaving it with a year-to-date return that is now close to flat, some are betting that the trading chart direction is going to continue up. But there are potential pitfalls ahead. After all, even with its recent dramatic moves, the price of gold is still higher by over $1,000 in the past one-year period.
“Gold is the new gold,” said Pippa Malmgren, a former Special Assistant to President George W. Bush and member of the National Economic Council.
Malmgren says what has attracted investors to gold has not changed. Many are scared that fiscal spending is out of control in the U.S. and that growth will be weak everywhere else. “This implies inflation,” Malmgren said. She added that the Trump administration’s pursuit of expensive foreign wars, as well as its embrace of cryptocurrencies, both add to uneasiness among some investors.
“This makes nervous investors turn to conservative methods for preserving value, such as buying gold,” Malmgren said. Central banks around the world, meanwhile, are expanding their gold holdings, which she says further signals a loss of confidence in fiat money, led by continued buying of gold by China.
“Central banks never stopped buying,” said Patrick Kennedy, founder and managing partner of Hartford, Connecticut-based AllSource Investment Managementd. “The PBOC added 19.9 tons in July, its largest month since October 2023 and its 21st straight month of accumulation,” Kennedy said.
That bullishness is shared by billionaire hedge fund manager John Paulson, who recently told CNBC that gold is only in early stages of a long-term rally, citing loss of faith in paper currency and runaway government spending (Paulson has been a gold bull since 2009).
While fear has been a driver of the gold rush mentality historically, Joe Cavatoni, senior market strategist at the World Gold Council, says he views the recent bounce among U.S. investors as more of an opportunistic trade.
“Gold’s recent rebound appears to be driven more by changing expectations around interest rates and the economy than by fear alone,” Cavatoni said. “There are signs of weakening, particularly on the jobs front, and markets are responding quickly. As investors adjust their outlook for rates, gold is reacting the way you’d expect a highly macro-sensitive asset to respond,” Cavatoni said.
“My sense is that the U.S. flows driving this move are more tactical in nature, as we have seen GLD options activity increase, while the buying we’re seeing out of Asia and Europe tends to be stickier,” Cavatoni said, referring to flows into the SPDR Gold Shares ETF (GLD), with investors in both regions adding to their…
Source: www.cnbc.com
