In a world of shifting economic tides, gold is glittering brighter than ever. Christopher Wood, a seasoned market strategist, unpacks the forces driving
the yellow metal’s surge, from central banks’ strategic stockpiling to a weakening dollar and the untapped potential of gold mining stocks. As the Global Head of Equity Strategy at Jefferies, Christopher Wood, in a conversation with ET NOW, covered various aspects of gold, including central bank buying, the gold rally, gold mining stocks, supply and demand dynamics in India, and gold's ranking among asset classes. With gold hitting all-time highs near $3,700 and central banks outside the G7, including India, aggressively buying since the 2022 freeze of Russia’s reserves, the metal is cementing its role as a premier alternative reserve asset, surpassing even the euro. Has gold truly broken out, and could $4,000 be next? Here’s why gold is commanding attention in today’s markets. The dollar peaked in December, and since then, it has weakened, contributing to gold’s rise. “…The dollar’s in a downtrend, and that’s obviously negative for the dollar, positive for gold,” he said. On the strategic shift toward gold, with central banks buying significant amounts, he said, “The central banks started buying, you can time it to the day when Russia’s foreign exchange reserves were frozen in early 2022.” “It’s already an alternative reserve asset. After the dollar, gold is now more significant than the euro,” Wood pointed out. Gold Buying by Central Banks Wood emphasised that the pattern of central banks buying gold has been in place since early 2022. It’s primarily central banks outside the G7, including India, driven by their shock at the freezing of Russia’s foreign exchange reserves. Some countries have even repatriated their gold, “which makes sense,” he noted. “Back in the 1930s, the Americans banned individuals from owning gold, so anything’s possible,” he added. Gold Rally Wood said, “We’ve been in a range around $3,300. The key question now, with gold around $3,700, an all-time high, is whether we’ve completely broken out.” “There’s a 50 per cent chance we have. If that’s the case, it’s a big deal,” he added. Gold Mining Stocks The most compelling investment area is gold mining stocks, he said. “They’ve historically outperformed gold in bull markets because they’re leveraged. But in this cycle, they’ve underperformed until very recently. In the last two months, gold miners have surged, though ETF flows into gold-mining funds remain negative year-to-date.” India, unfortunately, doesn’t have listed gold miners, but globally, they are now gaining momentum. Could gold go beyond $4,000 in the near term? “Anything is possible since we’ve broken out.” A major negative would be a total resolution of the Russia-Ukraine conflict with sanctions removed and Russia’s reserves unfrozen, that could cause a sharp correction, Wood said. VIDEO
Asset Allocation
In terms of asset allocation, Wood ranked gold highest and US Treasuries lowest. “In my global equity portfolio, I have 10 per cent in gold mining stocks and 6 per cent in a Bitcoin ETF.”
“Millennials may prefer Bitcoin to gold,” he added.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
