U.S. Bank WM is not ready to buy gold, but $3,000 is no deterrent when it does
Thu Mar 20 2025
After hitting all-time highs above $3,050 an ounce overnight, the gold market is seeing some modest profit-taking; while gold can still make new highs, one strategist said that investors should be careful at these levels.
In an interview with Kitco News, Rob Haworth, Senior Strategist at U.S. Bank Wealth Management (USBWM), said that his team has talked more about gold in the last six months than it ever has in history; however, he added that the risk for gold is that not only does market uncertainty have to persist but it has to escalate to support higher prices.
Haworth said that at $3,000 an ounce, he expects the gold market to have priced in a lot of bad news for the global economy and the U.S. dollar.
“There are reasons to say that economic uncertainty will remain elevated but at some point, that is going to level out. There’s going to be a rebalancing in trade and lower global trade but markets will adjust,” he said. “Once we get past peak uncertainty, we either need inflation to be a major problem or we need to see some kind of perpetual weakness in the U.S. dollar.”
For gold to sustain gains above current levels, Haworth said global interest rates would have to return to zero, which he said is unlikely.
While the European Central Bank and Bank of Canada have continued to cut interest rates, other major central banks have moved to a more neutral position. On Wednesday, the Federal Reserve left interest rates unchanged between 4.25% and 4.50% as the central bank said they remain concerned about inflation.
On Thursday, the Bank of England, the Swiss National Bank, and Sweden’s Riksbank all left their respective interest rates unchanged.
Despite paying more attention to gold, Haworth said that USBWM is not ready to buy the precious metal just yet.
“The big question for gold is whether this is a risk or an opportunity,” he said. “We haven’t made a change to include gold because I think for us, the debate on inflation remains uncertain. We continue to question how elevated inflation will be. We’re thinking inflation will be elevated but around 3% to 3.5%. I don’t think we are going back to 6% or 9%. Our inflation expectations are not as beneficial for gold compared to other inflation protection assets.”
Haworth said that he would need to see persistent stagflation threats before jumping into gold, which is not his base-case scenario.
“What we are hearing from companies is that there are a lot of short-term planning delays because of the economic uncertainty,” he said. “We think there is still enough growth in the system to get us through this. Our odds of a recession remain low. Earnings estimates for the S&P 500 for 2025 probably need to come down, but they will still be consistent with solid growth.”
In its updated economic projections, the Federal Reserve sees limited stagflation threats. It lowered 2025 GDP growth to 1.7%, down from December’s estimate of 2.1%. At the same time, the central bank increased its inflation forecast to 2.8% this year, up from the previous estimate of 2.5%.
Although USBWM is hesitant to invest in gold, Haworth said that if they see the right economic conditions, gold’s $3,000 price is not a significant barrier.
“The constructive news is that higher prices should be worrisome but aren’t,” he said. “Instead of looking at prices, it's more a fundamental question of whether more people are going to buy gold or not.”
“There are a number of cases to be made for demand to continue to go up irrespective of price,” he added. “Buying gold at $3,000 is not the same as trying to buy Cisco at 100 times earnings in 2000.”
Haworth said that he would expect Asian demand for gold to remain strong as Chinese investors continue to diversify away from the housing sector and equity markets.
“There is underlying demand there because Chinese investors need a savings alternative,” he said.
While USBWM is not looking at gold, Haworth said that the firm is heavily weighted in global equities and has reduced its exposure to U.S. markets.
Source: https://www.kitco.com/