Gold price hits new record, should we sell now?

Advertorial — It is an understatement to say that gold shines brightly at the end of 2024. The yellow metal has seen its price soar by more than 30% since January, reaching a new historic high at $2,800 per ounce in November. In one year, prices rose from $1,900 to $2,800, a gain of $900 per ounce. A spectacular performance which logically gives gold holders the desire to take some profits. But is now really the right time to sell? Several elements invite reflection.

An environment still buoyant for gold

The recent rise in gold owes nothing to chance. It is part of a global context that is particularly favorable for the precious metal. First of all, thehe major central banks, from the Fed to the ECB to the Bank of Japan, have all eased their monetary policy in recent months, enough to motivate you to buy a gold bar. The Fed began lowering its key rates in November, in line with market expectations.

This accommodative policy keeps real interest rates (inflation adjusted) at low or even negative levels. Indeed, according to JP Morgan’s projections, the“core” inflation (excluding food and energy) should remain at 3.5% at the end of 2024 and 2.6% in 2025 in the United States, above the Fed’s 2% target. Combined with falling key rates, this persistent inflation should therefore keep real rates in negative territory.

However, gold, an asset with no yield, has historically outperformed in these periods of low real rates, as analysts from the BDOR Agency, a recognized specialist in precious metals, regularly point out. So, when looking at the price of gold, we notice that between 2008 and 2012 for example, when American real rates were negative, the price of gold had multiplied by 2.5!

Persistent geopolitical tensions in the Middle East

There is another powerful factor driving gold prices: persistent geopolitical tensions, whether war in Ukraineof the Sino-American frictions or conflicts in the Middle East. Volatility indicators such as the VIX have also been at high levels for several months, a sign of persistent investor nervousness.

When geopolitical uncertainty rises, investors naturally turn to safe havens like gold. Growing tensions between the United States and China are pushing more and more countries to reduce their dependence on the dollar and diversify their foreign exchange reserves. Gold, through its status as a traditional reserve asset and its tangible nature, appears to be a choice alternative.

The outcome of the American presidential election, with a victory for the Trump-Vance ticket, has not calmed the volatility on the markets and reinforces the appeal of gold as an uncorrelated asset.

Gold, a tax and heritage shield

Beyond these cyclical factors, gold has structural advantages which argue for its long-term conservation. Starting with its tax status. In France, if you resell your gold after having held it for more than 22 years, you will be completely exempt from capital gains tax. If you resell it before age 22, the tax is reduced: 11% for income tax and 17.2% for social security contributions.for a total of 28.2%. This is less than most other investments, subject to the flat tax of 30% which will increase to 33% in 2025.

Furthermore, gold remains a safe haven par excellence in the face of the risks of financial crisis or loss of confidence in paper currencies. With exploding public debts and abysmal deficits, more and more states are seeing their solvency called into question. France is a striking example: its public debt is expected to reach 135% of GDP at the end of 2024 according to the latest Fitch rating which lowered the country’s outlook to “negative”. In this context, holding gold appears to be a valuable insurance policy, because its value does not depend on the financial health of a state or a company.

Finally, beyond its financial dimension, gold has a timeless heritage and emotional value. Whether coins or bars, it is a tangible asset that is passed down from generation to generation. In the event of a major crisis, gold will still be there, unlike certain financial assets which can lose all value overnight.

Bullish potential intact

In view of all these elements, selling your gold in a hurry does not seem wise. After a 30% increase, the temptation to take profits can be great (gold opened the year at $1,986). But with still significant growth potential, gold undoubtedly still has good months ahead of it.

JP Morgan analysts are also very clear in their latest projections: they see gold rising to $3,000 per ounce in 2025. They even estimate that this price could be exceeded if geopolitical tensions worsen. (e.g. open conflict between the United States and China) or if the US dollar depreciates faster than expected. In other words, even at $2,800, gold still has plenty of room for improvement.

Of course, nothing prevents you from selling part of your gold if you need liquidity or if you want to rebalance your assets by strengthening other assets. But before making any decision, it is recommended to carefully consult the gold price and to think about the place of this investment in your overall assets (real estate, shares, life insurance). For those who have not yet taken the plunge, it is not too late to buy a gold bar and build up solid long-term savings. Today’s highs may be tomorrow’s lows.

Content proposed by the BDOR Agency.