The price of gold has skyrocketed by about 900% since the turn of the millennium, outperforming major stock indices like the S&P 500 and the Stockholm Stock Exchange, which have seen increases of around 300% and 200%, respectively, during the same period.
In the current year, gold has continued to outshine the stock market with a 27% surge, breaking over 30 new price records. Erik Norström of the commodity fund Centaur Commodity attributes this price increase to central bank purchases and interest rate cuts. Countries like Brazil, Russia, India, and China, part of the Brics cooperation, are driving the buying pressure as they seek to challenge Western economic dominance.
They have currencies that few trust, and one way to counteract this is by buying more gold for their currency reserves. At the same time, interest rates have been lowered, and since gold can be seen as a very secure sovereign bond without a coupon, its value rises,” says Norström.
Analysts at Goldman Sachs predict that central banks will continue to buy gold at a rapid pace. They point out that several countries now want to reduce geopolitical risk and diversify their reserves away from the US dollar following the US decision to freeze Russian assets.
Major banks like Goldman Sachs and UBS have recently published analyses forecasting that the precious metal will rise by another 10-14% next year. Eric Strand, founder and CEO of AuAg Fonders, predicted a 20% increase in gold before 2024, a level that has now been surpassed. Looking ahead to 2025, he sees the potential for a new record of $3,300, representing a 25% upside. Strand primarily invests in commodities, gold, and silver, advocating for holding some form of precious metal for risk diversification.
“All objective economic research suggests that one should have 5-10% gold in a portfolio for it to be optimal. This is because gold does not move like other assets, so it is a good complement. But given the current world situation, I could easily double that figure and say between 10 and 20%,” says Strand.
The global state debts and the growing US budget deficit are the factors driving the gold market, according to Strand. With no indication that the debt problem will be resolved soon, he believes we are only at the beginning of a mature bull market for gold.
“We live on debt and solve it by printing new money, which is what drives the gold price. If you double the amount of money in a system, the value per unit is halved. And then the value of gold doubles,” explains Strand.
Next year, he sees a risk that Trump’s planned tax cuts could exacerbate the budget deficit, potentially driving up the price of gold further. Trump’s tariff threats are another possible catalyst.
Despite gold surging in double digits for two consecutive years, not everyone is as optimistic. The World Gold Council warns of “fomo” tendencies among investors, fearing that gold could become so expensive at some point that demand will decrease.
Even Erik Norström’s Centaur Commodity fund sees warning signs and has underweighted gold. In its latest monthly report, the fund notes that gold is “extremely overbought” among managers, a situation that has historically been followed by price declines.