World gold prices continue to disappoint investors when recording the second deep drop in a short time, losing up to 4% in just one trading session. This development takes place in the context of escalating geopolitical tensions after the conflict between the US, Israel and Iran, leading to many economic instabilities.
Currently, spot gold is trading around 4,610.9 USD/ounce, the lowest since the strong sell-off at the beginning of the year, when this precious metal once peaked at nearly 5,600 USD/ounce.
However, many experts still maintain an optimistic view on the long-term outlook for gold. Mr. Tavi Costa, Managing Director of Azuria Capital, said that the current strong corrections are only short-term fluctuations in a larger uptrend cycle for the precious metal.
According to Mr. Costa, the core factor supporting gold prices is not temporary market sentiment, but comes from the increasingly unbalanced public debt structure globally, especially in the US. As the cost of paying debt interest increases, governments tend to prioritize loose monetary policy to reduce fiscal pressure, thereby creating a favorable environment for gold.
Currently, the total US public debt has exceeded 39,000 billion USD and may reach 40,000 billion USD in the near future due to increased war costs.
Mr. Costa said that compared to the 1940s when gold reserves accounted for about 51% of federal debt, this rate is now only about 3%. This shows that the room for gold price increases is still very large if countries tend to increase their reserves of precious metals.
In addition, the trend of emerging economies reducing holdings of US bonds and switching to gold hoarding is also strengthening the long-term upward outlook. At the same time, the possibility of the USD weakening in the future further boosts the precious metals market.
Not only gold, mining stocks are also assessed to be in the early stages of a new growth cycle. According to Mr. Costa, the imbalance between high metal prices and low exploitation enterprise valuations is a great opportunity for investors.
Another notable factor is that gold supply is facing many limitations. In the past two years, the mining industry has almost no new large-scale mines discovered - a rare thing in modern history. The main reason comes from prolonged investment cuts after the previous cycle, causing future supply to shrink.
In that context, many experts believe that the current gold price adjustments may be an opportunity for accumulation, instead of a signal of trend reversal.
This is the time to build assets, not to sell in panic" - Mr. Costa emphasized.
