Since investors believe in expectations that the Federal Reserve will cut interest rates this year, while the geopolitical situation continues to be tense, the price of gold has already taken a rocket.

After the Federal Reserve kept interest rates unchanged this week and is expected to cut interest rates 3 times this year, the price of gold soared to a high of 2222.7 US dollars per ounce on Thursday. The increase has narrowed since then, and the latest transaction price is around 2,167 US dollars. Analysts expect there will be more room for gold to rise thereafter.

It is widely believed that when interest rates fall, the price of gold tends to rise, and bonds become less attractive because they no longer provide attractive yields.

Top hedge fund manager David Neuhauser (David Neuhauser) predicts that by the end of 2025, the price of gold will reach $2,500 per ounce and reach $3,000 per ounce by 2030.

After the Federal Reserve announced the interest rate decision, he said in an interview: “The Federal Reserve continues to say that it will cut interest rates 3 times, and the price of gold has reached a record high as expected. The dollar is weakening, so commodities should explode and quickly become the best performing asset class.” A weaker dollar often pushes up the price of gold because people have more purchasing power to buy more precious metals.

As the founder and chief investment officer of Livermore Partners (Livermore Partners), Neuhauser added that there is another reason to invest in gold: the US is heavily indebted.

“I think another reason to invest in gold is that when people see the huge deficit the US is accumulating, they think of tens of trillions of dollars in debt. I mean, the risk is that debt will continue to rise and there will be presidential elections later this year.” Neuhauser added. He believes that no matter who is elected in the US presidential election, they will “face a lot of pressure” to continue to stimulate the economy.

Neuhauser pointed out that according to Biden's plan, the government will have “large-scale” fiscal spending. This means that debt is unlikely to decrease. He said that at some point, the dollar will be under pressure. And as the government accumulates more debt, it may print more money or increase spending, which may drive up inflation — in which case investors may turn to gold to hedge against rising prices.

How to invest in gold through gold stocks?

Although the gold price hit a record high and sparked interest in gold stocks among some investors, the performance of some large miners was still poor. Examples cited by Neuhauser include Newmont (NEM) and Barrick Gold (GOLD), which he notes are expensive or “geographically unfavorable.”

Neuhauser said that for gold miners, what matters is their geographical location because geopolitical risk is a factor. He would choose miners that are headquartered in an OECD country, “have a good relationship with the government”, have no “crazy tax royalties”, are in safe jurisdictions, have excellent management teams, generate good free cash flow, and pay dividends.

One stock Neuhauser is optimistic about is the Canadian-listed Amaroq Minerals (AMRQ). He pointed out that Amaroq is an excellent independent mining development company, “which will be put into operation in 2024. It has a high-grade, low-cost mine, huge opportunities in the copper and nickel sector, and is located in an OECD country.”

Neuhauser also mentioned US-based Coldaren Mining (CDE), a mining company that mainly owns US gold and silver assets. Although the company has not performed well for many years, “we think now is the time for the stock to outperform the market in the next few years, as it will receive free cash flow for the first time and may start paying dividends,” he said.

The third stock he listed was the Canadian-listed Wesdome Gold Mines (WDO), which he said met his overall standards for gold mining companies.

Commodities (including gold and oil) may currently account for 25% of investors' portfolios, Neuhauser said. He admits that this ratio is about 10% higher than the “rule of thumb.” “Because I really think investors want to protect themselves from the depreciation of the dollar and inflation.” he said.