The escalating geopolitical conflicts in the Middle East and elsewhere, coupled with the uncertainty of the US election, have attracted investors, pushing up short-term gold prices.Its price has soared to a historic high, closely related to market expectations of interest rate cuts by the Federal Reserve.In the long run, the rise in gold prices can be attributed to the demand for gold purchases by central banks worldwide and the continued interest rate cuts, sufficient to support gold prices at high levels.

Since the beginning of this year, the price of gold has been soaring, repeatedly reaching unprecedented price levels, with no sign of stopping. As of the time of writing, the spot gold price has reached $2751 per ounce.

It is worth noting that due to the rising mining costs and high interest rates in recent years, gold mining stocks have performed poorly. However, with the decline in extraction energy costs and the rise in gold prices, the leverage effect of operations may help gold mining stocks outperform spot gold in the gold bull market.

In the gold sector of the US stock market, most gold mining companies with a total market value exceeding $5 billion have outperformed the 33.09% increase in spot gold prices this year. $Kinross Gold (KGC.US)$Please use your Futubull account to access the feature.$AngloGold Ashanti (AU.US)$ The increase within the year exceeded 70%. $Harmony Gold Mining (HMY.US)$ The increase within the year even doubled.

The demand for gold purchases accompanied by global central bank interest rate cuts has repeatedly hit new highs.

Global X investment analyst Trevor Yates stated that the two main driving factors of the gold uptrend are 'strong physical and financial market demand'.

Central bank purchases hit a record in 2022, the second best year in history in 2023, with the gold purchase trend continuing into 2024. George Milling-Stanley, Chief Gold Strategist at DFA Investment Management Company, stated that the main reason for the strength of gold is the strong investment demand for gold in China, as well as the strong 'shopping spree' of gold by central banks in emerging markets.

Since October, $Dow Jones Industrial Average (.DJI.US)$ and $S&P 500 Index (.SPX.US)$ It has been continuously hitting historical highs. Yates said, "Stocks and gold prices usually do not hit new highs at the same time - unless global central banks are continuously cutting interest rates. But central bank interest rates in various countries may further decline, increasing the possibility of a more stagnant inflation environment. In such an environment, gold has historically performed well."

In addition, the European Central Bank's interest rate cut further promotes the maintenance of loose global monetary conditions. The European Central Bank has also cut interest rates for the third time this year, by 25 basis points. Although this factor also helps the rise of the USD Index, the interest rate cut will reduce the holdings of gold,opportunity costso the gold price rose last Thursday along with the USD Index.

Driven by the overall U.S. interest rate cut cycle, global safe-haven demand, and strong buying from central banks, the current gold allocation pricing also has geopolitical factors. Boshi Fund believes that the intensity of geopolitical games is intensifying as the U.S. election approaches, and the high-intensity geopolitical game situation may continue until the results of the election in early November.

In addition, at the annual industry conference of the London Bullion Market Association, central bank officials from multiple countries recognized the long-term value of gold and expressed their intentions to increase allocations. The BRICSPAY payment system of BRICS countries unexpectedly saw the option of gold payment, all of which will become important forces disrupting the foundation of the US dollar system in the medium to long term and enhancing the value of gold.

Given all these factors, many analysts believe that it is not too late to join the trend of investing in gold now.

How to chase higher? Gold mining stocks are "cheap" compared to the price of gold.

In recent years, the poor performance of gold mining stocks is mainly due to the rise in mining costs and high interest rates. In 2022 and 2023, the total all-in sustaining cost (AISC) of producing an ounce of gold has sharply increased, severely suppressing gold mining stocks, which in turn has led many investors to lose confidence in the industry.

Precisely because of this, the undervalued prices of gold mining stocks are now presenting an opportunity for recovery. The proportion of pure gold revenue in gold mining stocks is very high, which is why the price trends of these gold mining stocks tend to align with the spot gold price.

As $VanEck Gold Miners Equity ETF (GDX.US)$ component stocks $Newmont (NEM.US)$ For example, the revenue in the first half of this year was $8.4 billion, with gold revenue accounting for $7 billion and revenue from other metals accounting for $1.4 billion, the vast majority of revenue coming from gold; $AngloGold Ashanti (AU.US)$ Revenue in the first half was $4.5 billion, with only $0.1-0.2 billion in by-product revenue.

Due to certain operational leverage, gold mining stocks may outperform gold during a gold bull market. The gold mining industry is energy-intensive, with energy being the largest cost for gold miners (usually estimated at around one-third), and operations are usually far from the power grid, requiring significant diesel consumption. Since 2014, thanks to the production of shale oil in the United States, gold mining has become a very profitable activity.

In the current low oil price environment, mining costs for gold miners are lower, combined with the continuous increase in the gold price, making the price difference more profitable for gold miners. If the cost for a gold miner to mine $100 of gold is $50, then when the gold price doubles, the profit will increase from $50 to $150.

In addition, the stock price trend of gold mining stocks usually does not move in sync with the broader market, providing a certain level of diversification that can help hedge against market downturns. Renowned hedge fund manager Stanley Druckenmiller sold off large tech stocks like Alphabet and Amazon at the end of 2023, and began buying gold mining companies like Newmont and Barrick.

Multiple analysts are bullish on gold to reach $3000 per ounce.

$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ Rising from around -1.2% in August 2021 to 4.2% in October 2024, for many investors, especially those in Western countries, the increase in yields is a signal to sell gold.

Indeed, from the end of 2020 to May 2024, as investors seeking returns reduced their positions, ETFs holding physical gold reduced their holdings by about 30 million ounces, more than a quarter of their total holdings.

If real interest rates drop significantly, it could be beneficial for gold and golden industrial concept. If the Fed continues to cut interest rates, maybe we could see the price of gold not only maintaining its current level but soaring to new heights. Citigroup, Goldman Sachs, and Bank of America all believe that the gold price will reach $3,000.

Citigroup analysts insist that the gold price will touch $3,000 in the next six to nine months. They believe that if oil prices surge due to recent escalations in the Middle East, gold prices should rise. Citigroup stated that despite a decline in retail demand in China over the past three months, the gold price still performed 'very well,' reflecting buyers' willingness to pay higher prices.

Michael Widmer, the metals research director at Bank of America, said on Monday that the 10-year U.S. bond's real yield (adjusted for inflation) has decoupled from the gold price. If there are many concerns regarding the U.S. bond market, then gold is almost the most ideal.Its price has soared to a historic high, closely related to market expectations of interest rate cuts by the Federal Reserve..

Goldman Sachs analysts also predicted in early September that the price of gold would reach $2700 per ounce in 2025. It appears that this target has been achieved ahead of schedule. The analysts explained: 'We reiterate our bullish position on gold, as global interest rates fall, central bank demand structurally increases, and gold is gradually boosted by hedging geopolitical tensions, financial and recession risks.'

Editor/Rocky