Interview
Still Bullish on Gold
- Private investors are expected to compete with central banks for limited gold bullion in 2025 as the Federal Reserve cuts rates, potentially leading to losses cascading through the system if dealers flip from buying to selling gold options as prices rise and fall.
- Gold demand is driven by fiscal sustainability fears and the "debasement trade," with call option demands reaching record levels in January 2025, prompting a forecast that gold could reach $5,400 by the end of 2026 if central banks maintain current buying levels.
- The $5,400 gold forecast does not account for additional diversification flows, which could generate significant upside, while ongoing volatility is expected to potentially dampen central bank purchasing and result in faster rallies and sharp pullbacks.
- Silver is facing a persistent liquidity squeeze in London due to dislocation to the US ahead of anticipated tariffs, creating extreme price volatility that is expected to continue until new investor demand hits the bottom of the vault.
- Unlike gold, which is difficult to scale, higher prices for other commodities like copper are expected to incentivize increased production, likely causing prices to drop despite current insurance demand and stockpiling trends.
- The firm anticipates extreme volatility in both metals will persist for the foreseeable future due to call option activity and liquidity issues, though it holds a stronger conviction in gold given the severe volatility and liquidity constraints inherent to the silver market.