Gold price outlook: After one of the most volatile years in its history, gold is once again back in focus. The precious metal surged to record highs earlier this year before suffering a sharp correction as investors reassessed the outlook for inflation, interest rates and geopolitical risks.
While many traders remain cautious after the recent decline, Jefferies’ Global Head of Equity Strategy Christopher Wood believes the pullback presents an opportunity rather than a warning sign.
Wood argues that investors should begin rebuilding exposure to both gold and gold mining stocks, suggesting that the recent weakness could mark a pause in a much larger structural bull market. His latest comments come as markets grapple with uncertainty surrounding artificial intelligence-driven investment, elevated oil prices, geopolitical tensions in the Middle East and the future path of US monetary policy.
Gold has fallen around 7% from the beginning of the year after an extraordinary rally that saw prices hit record highs before retreating sharply in July.
Christopher Wood sees a familiar pattern emerging
In his latest Greed and Fear report, Wood urged investors to resume accumulating gold after what he described as an “extended pause to refresh.” His optimism stems from concerns that the investment boom surrounding artificial intelligence could eventually face the same fate as the technology bubble more than two decades ago.
Drawing comparisons with the dot-com collapse, Wood noted that the initial sell-off in technology stocks eventually spread across the broader market as investors realised the economic fallout would not remain confined to one sector.
“The time has come for investors to start accumulating gold and gold mining stocks again after an extended pause to refresh.”
Why can the next rally be bigger?
According to Wood, the current AI-led capital expenditure cycle could face a similar turning point if credit conditions begin to deteriorate. He believes the massive spending on AI infrastructure has been one of the key drivers of US economic growth over the past three years, alongside supportive fiscal policies and the wealth effect generated by rising equity markets.
However, if corporate investment slows sharply because of tightening credit conditions, market expectations could swing rapidly away from higher interest rates towards monetary easing by the US Federal Reserve. Such an environment has historically been supportive for gold.
“A similar scenario could unfold if the AI capex boom implodes, which would happen if credit issues come to the fore.”
Wood’s latest recommendation stands out because it comes after he had previously advised caution following gold’s remarkable rally. His latest note signals that he believes the recent correction has created a more attractive entry point for long-term investors.
Why gold remains in focus despite recent weakness
Wood’s optimism is supported by several broader market trends. The World Gold Council believes current gold prices largely reflect an environment characterised by moderate economic growth, cooling but still elevated inflation and expectations of limited additional central bank tightening. Under these conditions, it expects gold to remain broadly range-bound within roughly 5% of current levels.
At the same time, the Council believes several catalysts could reignite the rally. A weakening global economy, fresh geopolitical shocks, declining interest-rate expectations or renewed buying after the recent correction could push gold back towards US$4,500 per ounce or even higher if market conditions deteriorate further.
The geopolitical backdrop has already begun providing support. Escalating tensions involving the United States, Iran and Iran-backed Houthi forces have revived demand for safe-haven assets. Concerns over disruptions to oil supplies through key shipping routes, including the Red Sea and the Strait of Hormuz, have increased investor demand for defensive assets such as gold.
Higher crude oil prices could also add to inflationary pressures globally, complicating the Federal Reserve’s policy outlook. While elevated interest rates generally weigh on non-yielding assets like gold, geopolitical uncertainty has helped offset some of that pressure by increasing demand for portfolio protection.
Recent market action reflects that balancing act. Gold stabilised after several weeks of selling pressure as Brent crude retreated from above US$100 a barrel, while investors shifted their attention to the upcoming US Federal Reserve policy meeting. Spot gold edged higher after an earlier decline, supported by dip-buying and renewed geopolitical concerns.
Markets currently expect the Fed to leave interest rates unchanged at its next meeting, although traders continue to price in a high probability of a rate increase later this year. At the same time, strong central bank purchases, resilient physical demand from Asian markets and policy developments in countries such as India remain important factors that could influence bullion prices over the coming months.
For Wood, however, the bigger picture extends beyond near-term fluctuations. He believes the combination of potential stress in the AI investment cycle, shifting monetary policy expectations and persistent geopolitical uncertainty could lay the foundation for gold’s next major bull market, making the recent correction an opportunity rather than the end of the rally.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
