Gold has pared its gains lately with hopes of tariff relief.Lemon_tm/iStockPhoto / Getty Images
Gold has lost some glitter after its dramatic run-up, but the yellow metal may just be taking time to catch its breath.
Spot gold has climbed about 25 per cent this year to around US$3,250 an ounce – off last month’s record high of US$3,500, but up substantially from around US$2,336 an ounce a year ago.
Despite its retreat amid de-escalating trade tensions that roiled stock markets, some investment experts argue the gold bull cycle isn’t ending but merely taking a break.
“Trees don’t grow to the sky – there’s no question bullion was overbought,” says John Ing, president and chief executive officer of Maison Placements Canada Inc. in Toronto
“I expect gold’s downside is around US$3,000 an ounce, but I can see upside of US$4,000 and higher,” says the veteran gold watcher.
“At one time, I had a US$2,200 target and everybody laughed,” Mr. Ing recalls. “At US$3,000 an ounce, there were chuckles. Then, it hit US$3,500. I honestly don’t know how high gold is going to get.”
Gold has rallied amid strong buying by central banks and Asian countries, including China, as well as recessionary fears after U.S. President Donald Trump announced his so-called “Liberation Day” reciprocal tariffs on April 2.
But gold has pared its gains lately with hopes of tariff relief following U.S. trade talks with various countries. Last weekend, the U.S. and China – the world’s two largest economies – agreed to slash tariffs for 90 days, although a 30-per-cent U.S. tariff on Chinese goods remains, while China maintains a 10-per-cent tariff on U.S. imports.
Mr. Ing says the truce is positive, but the damage has been done to the global economy. China’s floor-tariff is inflationary, he says, and a growing U.S. deficit will lead to more money printing.
He is also a gold bull because the industry faces depleting resources, and it takes up to 15 years to build a mine. He adds that gold stocks are attractive because they have lagged bullion.
Among senior producers, he likes Agnico Eagle Mines Ltd. AEM-T and Barrick Mining Corp. ABX-T. Among mid-tier producers, he favours Eldorado Gold Corp. ELD-T, B2Gold Corp. BTO-T and McEwen Mining Inc. MUX-T, a gold miner with a copper subsidiary.
Lundin Gold Inc. LUG-T and Endeavour Mining PLC EDV-T may seek acquisitions or be takeover targets themselves, he adds. “We are in a game of musical chairs, and there are only a few chairs left.”
Nawojka Wachowiak, senior portfolio manager at Ninepoint Partners LP in Toronto, is also upbeat on gold and sees the pullback as a buying opportunity.
The multi-year gold buying spree by central banks should continue because they want to diversify away from the U.S. dollar, says Ms. Wachowiak, who runs Ninepoint Gold & Precious Metals Fund.
There has also been growing gold demand from Western investors because of economic uncertainty and to hedge risk, she adds. These investors had ignored gold while sitting in high-flying technology stocks.
Although spot gold surged 27 per cent last year, equities trailed, she notes. The U.S.-listed VanEck Gold Miners ETF GDX-A only rose 11 per cent, while VanEck Junior Gold Miners ETF GDXJ-A gained 16 per cent.
Gold miners struggled with cost inflation last year, but that stabilized in the second half of 2024, so they now generate a lot of cash flow for share buybacks and dividend increases, Ms. Wachowiak says.
Gold equities are a “catch-up trade,” she says. “The sector is reasonably cheap with an opportunity to buy quality names.”
Agnico Eagle Mines, Kinross Gold Corp. K-T, and Newmont Corp. NGT-T fit the bill, she says. Newmont is not in the Ninepoint fund, but Ms. Wachowiak plans to revisit the name after impressive first-quarter results.
Mike Philbrick, chief executive officer of ReSolve Asset Management Inc. in Toronto, says he became bullish on gold after seeing a sign of a technical breakout in March, 2024.
Gold has more potential upside because it has gone sideways or experienced a “basing period” for 15 years, he says, referring to a technical analysis term to describe a price consolidation before a bullish phase.
A breakout doesn’t always mean a trend, but it often does for an asset class that has disappointed for so long, Mr. Philbrick adds.
The record-breaking gold purchases of 1,000 tonnes annually by central banks over the past three years should continue, he says.
Geopolitics gave gold momentum when the U.S. and its allies froze US$300-billion of Russia’s assets outside that country in 2022 as part of sanctions for invading Ukraine.
Some drivers of gold’s rise are also changing, Mr. Philbrick says. The precious metal has surged to new highs even when real interest rates have risen, so it’s “no longer responding to interest-rate policy.”
“Gold is trading like a hedge against sovereign credit risk rather than an inflation hedge,” he says. “It is becoming a safe-haven asset.”
But Mr. Philbrick says he wouldn’t be surprised if gold went through a correction, adding that investors with no exposure to gold or gold equities might use the pullback in spot gold to add a position.
“This is just the pause that refreshes, in my opinion,” he suggests, as some investors are taking profits or selling gold to rebalance their portfolios to their original asset mix.
Although his firm‘s alternative strategy funds invest in gold futures, he says individual investors can consider gold bullion funds.
Sprott Physical Gold Trust PHYS-T, Purpose Gold Bullion Fund KILO-T and the Royal Canadian Mint’s Canadian Gold Reserves exchange-traded receipt MNT-T will also allow investors to redeem their units for physical gold instead of cash if they meet minimum redemption amounts, he adds.
Global X Gold ETF HUG-T, which invests in gold futures, can be useful for traders, while iShares S&P/TSX Global Gold Index ETF XGD-T offers gold equity exposure, he says.
Partially covered-call gold equity ETFs, such as Hamilton Gold Producer Yield Maximizer ETF AMAX-T, Global X Gold Producer Equity Covered Call ETF GLCC-T and CI Gold+ Giants Covered Call ETF CGXF-T, may appeal to income-seeking investors, he adds.
“By writing options on only part of the portfolio, these ETFs allow a portion of the holdings to participate fully in any strong upward move, while still delivering some yield,” Mr. Philbrick says.
