CBS cites BFS on investing in gold in 2025

As gold continues to flirt with $3,000 per ounce, BFS Director of Research & Portfolio Manager Rosa Chen, CFA, CPA helped CBS Marketwatch break down factors that could affect its trajectory in an article titled “3 gold price scenarios that could occur in 2025.”

The article lists following factors that may influence the price and cites Rosa as a key source in identifying them:

• Dollar index and real yields: Rising inflation-adjusted yields often put downward pressures on gold prices. On the other hand, a weaker dollar typically supports higher gold values.
• Central bank purchases: Large national banks have been steady gold buyers, creating reliable demand regardless of market prices. And if other countries increase their gold reserves while reducing their U.S. Treasury holdings, it can help maintain gold’s value.
• U.S. debt and inflation: America’s growing deficit could lead to higher inflation as the government seeks to fund operations with less valuable dollars. This could boost gold prices.
• ETF investment flows: Increased inflows to gold ETFs signal growing investor demand.
• Market disruptors: Unexpected events such as major cyber attacks could send prices soaring. In contrast, mining technology breakthroughs might increase supply and lower prices.

Below is Rosa’s full Q&A with CBS.

Due to the debt load of the United States and many other countries including China, governments will opt to generate inflation to lower their debt loads, which could be positive for gold prices. How much of that plays out in the next year remains to be seen, but gold has been and still is on an overall upward trend.

While inflation seems to have stability in the U.S. in the short-term, our deficit and debt load could be a factor in driving up inflation and therefore the value of gold. This is because the government will do what is necessary to fund the government, including generating nominal GDP growth. Paying back debt with less valuable dollars is a tried and true method throughout history in dealing with too much government debt.

Gold has a 5000-year history of being the currency of last resort. We are seeing foreign central banks increasingly buying gold instead of Treasuries and using gold to net out imports/exports such as China and Russia. While gold has not become an American cultural focal point, it remains so in many other countries.

Central banks are an inelastic purchaser of gold. They tend to buy gold regardless of the price or the potential for gains. Central bank buying behavior seems to have set a floor for the price of gold recently, with rates and inflation potentially having a bigger impact in the near term.

Physical gold is typically the best form to invest in but there are costs associated with storing and protecting it, as well as high commissions on buying and selling it. For this reason, we often favor mining stocks which currently trade at a reasonable valuation and sometimes pay a dividend.

Gold is a good investment for anyone looking to protect their purchasing power over long periods of time. Since we are likely to see more inflation in the future, gold can be a good investment for retirees who don’t have a salary that can be increased to keep up with inflation. The downside is that gold cannot be used to buy products and services and there’s a cost associated with converting to currency.