Why Wall Street’s Gold Bulls Won’t Back Down - Volatility Be Damned

Gold's wild ride fails to shake institutional faith

The Metal That Refuses to Tarnish

Market turbulence sends traditional investors scrambling for cover - but gold's true believers aren't flinching. While crypto bros chase the next shiny object, Wall Street's old guard keeps stacking the original store of value.

Analysts point to gold's historical resilience during economic uncertainty. The yellow metal continues drawing institutional money despite price swings that would make day traders queasy.

Safe Haven or Safe Bet?

Central bank buying patterns reveal deeper confidence beneath surface volatility. Gold's fundamentals remain rock-solid while fiat currencies play musical chairs. Because sometimes the best innovation is 5,000 years old.

Wall Street's gold obsession proves some traditions die hard - especially when they keep beating your actively managed portfolio.

KEY TAKEAWAYS

• This year's rally in gold paused this week as some investors reaped the rewards of profits they have made.
• Analysts, though, remain bullish that demand for gold will persist.
• That would be good news for gold miners, whose shares have soared this year.

The year-long rally in the price of Gold paused this week as some investors cashed in and trimmed their exposure to the precious metal. Nevertheless, analysts say the structural demand that has underpinned gold's surge remains in place.

Gold fell 6% Tuesday, suffering its biggest one-day drop in 12 years and its largest one-day dollar decline ever. It was the first steep decline after months of record highs for the precious metal.

Analysts, though, don't see this as the end of the bull run that gold and other precious metals have enjoyed this year as more central banks store their reserves in gold and more investors turn to it as a hedge for economic uncertainty. Even after this week's slide, gold remains up 57% this year, easily surpassing the 15% gain of the benchmark S&P 500 stock index.

Why This Matters to Investors

The factors that have driven the price of gold to one record high after another remain in place. From concerns about the U.S. government shutdown and trade disputes between the U.S. and China to fears about government debt sustainability and increased stock market volatility, various factors have caused investors to turn to gold as a safe-haven investment.

'Healthy' Reversal

J.P. Morgan, in a research note, said gold could dip to technical support territory of $3,944-$4,000 per troy ounce. It reached almost $4,400 Monday before dipping as low as $4,030 Wednesday and rebounding to around $4,160 Thursday afternoon.

Essentially, the firm characterized gold's pullback this week as investors simply taking a breather after this year's rally intensified in the past several weeks.

"After a period of heavy inflows and extended momentum, a reversal and digestion is healthy for gold and doesn't change our multi-year structural bullish view on gold going forward," J.P. Morgan said, noting it expects central banks and consumers to be "reliable" buyers on price dips. "From our perspective, once we get through this consolidation, we reset to eventually push higher again amid an unexhausted longer-term trend of official reserve and investor diversification into gold."

Sticky Buying

In another research note, Goldman Sachs said that the easing of a recent short squeeze in silver supplies in London has led to silver's decline in the past week and likely spilled over into the gold market. That squeeze had pushed the price of silver early last week to its highest level since 1980. (Silver was up about 1% on Thursday but has declined about 9% over the past week.)

Regardless, Goldman said it maintains its $4,900 end-of-year price target for gold, adding that it sees upside risk for that target because it expects "sticky, structural buying will continue further."

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Such buying WOULD continue benefitting gold miners, whose share prices have soared this year. The Van Eck Gold Miners ETF (GDX) has surged nearly 120% year-to-date. Shares of the world's largest gold miner, Newmont (NEM), which is due to release quarterly results after Thursday's market close, have risen 140% this year, making the stock one of the top performers in the S&P 500.