Michael Hartnett, Chief Investment Strategist at Bank of America, suggests that investors should buy gold even if it hovers around record highs.
In the latest report, Hanett wrote that investors should do what the central bank is doing - buy gold.
The strategist explained that this is because the Fed's interest rate cuts in the coming months may trigger a rebound in inflation next year, and physical assets such as gold have traditionally performed well during inflationary periods.
After Hartnett made this statement, Federal Reserve Chairman Powell issued a dovish signal on Friday: the inflation rate is only half a percentage point higher than the Fed's 2% target, and the unemployment rate is also rising. "The time for policy adjustment has arrived. This statement reinforces the expectation that the Federal Reserve will cut interest rates for the first time at its meeting on September 17-18.
At the same time, precious metal prices are experiencing a record rebound. Since the beginning of this year, gold prices have surged by about 20%, surpassing the 18.8% increase of the S&P 500 index and outperforming technology stocks.
Harnet emphasized that gold is the only asset that performs better than US technology stocks.
The report points out that a confusing factor behind the rise in gold prices is that investors have not been chasing gold all along. On the contrary, the gold market has seen a net outflow of $2.5 billion, which means investors are taking profits at a time when gold prices are rising at a record high.
At the same time, this also means that the buying of gold comes from another group in the market.
Hanette Qiang stated that the coexistence of a historic high in gold prices and negative outflows of funds can only be explained by the unprecedented purchasing volume of the central bank.
Gold is now the second largest reserve asset (16.1% vs 15.6% of the euro) and one of the assets with the lowest correlation to stocks among all asset classes, "the report states.
Finally, according to the above report, potential gold ETFs worth considering include iShares Gold Trust Micro (IAUM) and SPDR Gold MiniShares Trust (GLDM), which Hanett referred to as "top tier".