Editor’s Note: Like Chief Income Strategist Marc Lichtenfeld, Monument Traders Alliance’s Karim Rahemtulla is extremely plugged in to all the latest news on precious metals.
Below, he shares three reasons he believes gold can keep rising despite recently hitting all-time highs.
– James Ogletree, Managing Editor
Gold is the gift that keeps on giving in 2024.
Over the past few months, the metal has been trading at all-time highs.
When you look at our current fiscal situation, this shouldn’t come as a surprise (more on that in a moment).
As you’ll see in the chart below, gold reached a peak of more than $2,700 per ounce in October as people piled in at higher levels ahead of the election.
Here are three reasons the gold bull run is still going.
1. Our fiscal situation is out of control.
Our fiscal situation is pretty unbearable at the moment. Sure, the S&P 500 is consistently hitting all-time highs. People are out spending money. I went to Las Vegas a few weeks ago, and I noticed the airlines were packed on my way over there.
But the lack of visual evidence of a recession is only a short-term thing.
Over the last 30 years, our debt problem has steadily gotten worse and worse.
It doesn’t matter which political party is in office – the debt has been rising. There’s sure to be a ton more spending in 2025, so it doesn’t look like this fiscal problem is going away anytime soon.
2. Interest rates aren’t budging (despite the Fed’s efforts).
In September, the Federal Reserve made its first cut to the federal funds rate in over four years.
The intent was to lower interest rates, but that hasn’t happened.
In fact, the latest data from Freddie Mac shows the average 30-year mortgage rate has actually increased to 6.7% in the three months since the move.
This is due to the long-term rates showing that our fiscal house is not in order, meaning the government has to raise more and more money. That creates an imbalance.
You might think that a higher interest rate should equate to lower gold prices. That’s true in a conventional sense.
But these aren’t conventional times.
The truth is that if our country keeps issuing more debt and spending like crazy on the government side, interest rates can’t come down.
The only way out of the current mess is to devalue the U.S. dollar and the debt – both of which are good for gold.
3. The conflicts in the Middle East and Ukraine.
The situation in the Middle East and Ukraine also isn’t helping. We’re roughly one year removed from when tensions started to heighten in the Middle East, and it’s been almost three years since Russia launched its first military operation in Ukraine.
The cost of war to Israel’s economy is estimated to be around 12% of its GDP.
As for Russia/Ukraine, the U.S. doesn’t trade with them as much, but the war has affected U.S. businesses and caused gas prices to increase, which has contributed to inflation.
There’s also ever-lingering concern that Iran could get involved and spark a broader war in the Middle East.
This fear has already spilled bullish sentiment over to gold’s little brother – silver. For the past few months, silver has been trading at over $30 an ounce, a level it hadn’t reached since back in 2012.
A Golden Ticket
For these three key reasons, I believe gold still has plenty of room to run going forward.
What’s brewing here might just lead to the most significant gold rally of the century.