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Gold prices could be heading towards $4,000 per ounce by the end of this year as the Federal Reserve begins to cut rates and the US dollar continues its decline, according to Canadian investment firm Fidelity.
In an interview with Bloomberg on Tuesday, fund manager Ian Samson said his firm is still bullish on the precious metal, with some cross-asset portfolios recently increasing holdings after prices eased from the all-time high of $3,500 set in late April.
“The rationale for that was that we saw a clearer path to a more dovish Federal Reserve,” Samson said, adding that some funds had as much as doubled their 5% allocation over the past year.
Also, August is often slightly weaker for markets, so more diversification “makes sense,” he stressed.
Bullion is one of the best-performing assets this year, rising by more than 27%. Driving this rally was US President Donald Trump’s aggressive attempts to reconfigure the global trade landscape, fueling both economic and geopolitical uncertainty amongst investors.
After pulling back from its record high, the yellow metal has traded within a tight range over the past few weeks, with demand for havens cooling a little as some progress in US trade talks eased fears about worst-case scenarios for the global economy.
“Perhaps you’re going to avoid the doomsday scenarios that were painted earlier in the year, but ultimately we’re heading to a 15%-or-so tax on about 11% of the US economy — which is imports,” said Samson, referring to Trump’s tariffs. “You’d expect it to slow the economy.”
The bullish outlook for gold mirrors that of Goldman Sachs, which has made the case in recent quarters for an eventual rally to as much as $4,000. Meanwhile, others like Citigroup are being more cautious, with forecasts of weaker gold prices.
By noon Tuesday, spot gold rose slightly to $3,319.51 per ounce after falling to a three-week low the previous session.
All eyes are now on this week’s Federal Reserve meeting, which is not expected to yield a rate cut. That outcome would likely fuel further division within the US central bank, as Governor Christopher Waller recently called for an immediate monetary easing to support the labour market.
“A US slowdown would likely see the dovish camp gain more influence in guiding policy, with the dollar tending to soften in environments of weaker growth,” Samson said in the interview.
Moreover, Jerome Powell — whose term as Federal Reserve chair ends next May — will probably be replaced by someone “more amenable” to lower borrowing costs as Trump continues to lobby for interest-rate cuts, he added.
(With files from Bloomberg)