Investors of all stripes have flocked to gold in recent months as the safe haven asset gained traction amid widespread economic uncertainty, and one expert says the price of the precious metal likely has further to climb.
“There’s this perception that gold is a crowded trade, that it’s over-owned,” Daniel Ghali, director of commodity strategy at TD Securities, told BNN Bloomberg in a Wednesday interview.
“We actually think gold appears to be technically overbought but it’s actually under-owned… the U.S. dollar is partly losing its store of value, gold is benefiting from that and the outlook for gold from here is exceptionally strong.”
Ghali argued that despite gold’s recent rally, which pushed it to record highs, there are few investors with large gold holdings that will be looking to sell the commodity anytime soon and that should keep upward pressure on prices.
“Who really has a lot of gold to sell? It’s not really clear to me, which tells you that selling exhaustion appears imminent to us, and participation in gold is so low that I have a hard time seeing how it will trade significantly lower,” he said.
Though still near record highs, gold prices have seemingly hit a plateau over the past couple of months, and Ghali argued that is due to the relative easing of global trade tensions.
But the economic and financial impacts of U.S. tariffs and overall trade policy remain a concern for investors, who will likely turn to gold again if uncertainty returns.
“The east fears currency depreciation, that’s what drives them to buy gold. The west fears recession and stagflation, that’s what drives them to buy gold. The détente on trade has eased those fears, and in turn, the buying impulse that drove gold prices higher earlier this year has faded,” he said.
“But participation at this moment in time is so low that it’s really just hard to see who has more to sell, and you have so many catalysts on the horizon… on tariffs, on Fed credibility, the interest rate outlook and so on. It’s hard to see how participation in gold is not going to rise from current levels.”