sameer Samana - Director of Global and Real Estate stocks at Wells Fargo Investment Institute - said that the multi-year uptrend of gold is still intact. He said there was no harm in the uptrend, although the possibility of prices continuing to accumulate was entirely possible.
Wells Fargo predicted the US Federal Reserve (Fed) will cut interest rates at its December meeting, but it is also likely that they will wait until January. Regardless of the scenario, interest rate cuts are a given.
Samana believes the Fed will become more dovish as US President Donald Trump continues to make personnel nominations, especially when the successor to Fed Chairman Jerome Powell is chosen, possibly in December.
He said Kevin Hassett is currently the leading candidate. Market members will increasingly pay attention to Mr. Hassett's statements, which, according to Samana, will likely resemble the view of Governor Miran and aim for an interest rate of the 2% range.
This will reduce one of the biggest hurdles for gold: The opportunity cost of holding non-yielding assets. Interest rates, especially real interest rates, when decreased, will support gold prices. That could also lead to another weakening of the US dollar.
The USD index has decreased by nearly 15%, from 110 to 96, but has only recovered about 3-4%, which Samana assessed as a negative signal. He predicted that in the next 12 to 15 months, the greenback is likely to move sideways, or at least not create a strong uptrend - a positive factor for gold. Wells Fargo does not see much room to increase the USD from this time.
Samana also sees the trend of asset diversification spreading in the global market, and this will continue to support gold.
In the context of increasing uncertainty, investors are increasingly looking for protective tools that bonds previously often took on. He said that in an environment where inflation remains high and the Fed cuts interest rates when inflation is anchored at 3%, gold is becoming an important protective tool.
Another factor that Wells Fargo believes will boost gold prices is the relative weakness of the precious metal's strongest competitors, including the AI-led stocks and the crypto market.
Samana commented that a large part of the capital flow into the US in recent times has come from high interest rates and stability of the US in the context of many fluctuations in the world, combined with the outstanding performance of AI stocks, causing many investors to exchange foreign currency to USD to buy US stocks. However, many of those drivers are now degraded or no longer sustainable.
He said AI is now a global story. Investors can look for opportunities in Korea or China... not much different from the US, because the structure of the AI supply chain and development is changing.
Samana believes that crypto has been an attractive choice for diversification and good performance in most of the gold rally period, but that is no longer true. Bitcoin has filled that void, but in the past six to twelve months, even crypto has weakened. He emphasized that gold is a new asset that has proven resilient over time.
Another notable point according to Samana is that gold has actually outperformed the hot stock market for many years. If converting the S&P 500 to gold prices, this index has reached its peak since the end of 2021 and has been declining relatively for gold for four consecutive years - something that many people, according to Samana, did not realize.
he said Wells Fargo often struggled to convince investors to allocate to the commodity group. But overall, this asset group is a great diversification tool, and if you look deep into gold, this is one of the assets with strong performance in a not-so-short period of time.
For Samana, gold's bullish stance is structural. If the Fed starts cutting interest rates and prioritizes supporting the labor market while inflation remains at 3%, it would mean that bond investors will suffer.
Bonds will face pressure and no longer be an effective hedge in the context of high inflation. At that time, investors have to find another place to diversify, and gold becomes the easiest choice because it often has good results in times of uncertainty. For individual investors, this is a role that bonds have taken on.
