Bernstein's Bullish Gold Outlook

According to Bernstein analysts, gold may reach $3,400 per ounce if U.S. real interest rates fall to zero due to fiscal policies weakening the U.S. dollar.

The analysts note that gold typically gains value when the U.S. dollar depreciates and real interest rates decline.

The pathway to $3,400 is likely a result of either a "red sweep" or "blue sweep," which would increase U.S. fiscal deficits and debt, exerting downward pressure on real rates.

For the short term, Bernstein is more conservative, forecasting an average gold price of $2,600 per ounce for Q4 2024 and $2,500 per ounce for 2025-2028, which is 5-10% higher than market consensus.

Increased demand from central banks, especially in China, Russia, and Singapore, which have tripled their gold reserves in the last decade, further supports a bullish gold outlook.

Geopolitical tensions also contribute to gold's appeal as a "flight-to-safety" asset. Although easing tensions might lower gold prices, Bernstein expects that would lead to increased central bank buying, stabilizing the metal's price.

The role of exchange-traded funds (ETFs) is also significant. Bernstein notes recent small inflows into gold ETFs, which, if maintained, could push prices higher.

In this context, Bernstein finds potential in gold equities, particularly Barrick, suggesting that as production grows, cost pressures may decrease, enhancing margins and creating opportunities for a re-rating of multiples.