Global physically backed gold ETFs saw US$1.4 billion in inflows in September, with assets under management rising 5% to US$271 billion.
HSBC raised its 2024 gold price forecast to $2,395 per ounce, citing geopolitical risks, fiscal imbalances, and monetary easing as key drivers.
Amplified returns, rising dividends, and increased merger activity make gold stocks an attractive option for portfolio diversification and growth this fall.
Global physically backed gold ETFs marked their fifth consecutive month of inflows in September, accumulating US$1.4 billion. North American funds led the surge, while Europe experienced slight outflows, making it the only region to post a decline. These consistent inflows, coupled with record-high gold prices, drove global assets under management (AUM) up by 5%, reaching a new peak of US$271 billion at month-end. Additionally, total global gold holdings increased by 18 tonnes to stand at 3,200 tonnes by the close of September.
Recent inflows have sharply reversed year-to-date (YTD) outflows, pushing net YTD flows into positive territory at US$389 million. This turnaround, fueled by rising gold prices, has resulted in a 26% YTD increase in total AUM. Notably, North American funds flipped into positive YTD flows, while Europe remains the only region still showing outflows for 2024. Despite some recent slowdown, Asian funds continued to lead global YTD inflows, solidifying their position as key drivers of demand this year.
HSBC Lifts Gold Price Forecasts on Geopolitical Risks and Fiscal Imbalances
According to the HSBC’s latest note, the recent surge in gold prices, which reached a record high of $2,865 per ounce in late September, was driven by increased safe-haven demand and hedge fund activity. As a result, HSBC adjusted its average gold price forecasts upward for multiple years, reflecting a more bullish stance on the precious metal.
For 2024, HSBC raised its forecast from $2,305 to $2,395 per ounce, showing increased confidence in sustained demand for gold. The bank also significantly adjusted its 2025 forecast, lifting it from $2,105 to $2,625 per ounce, a move underscoring its expectation that gold will continue to perform well amid heightened global risks. HSBC also raised its 2026 forecast to $2,515 per ounce, up from its previous projection of $2,025, and the long-term outlook was revised upwards from $2,000 to $2,200 per ounce.
Geopolitical tensions: Middle East conflicts and economic uncertainty have spurred safe-haven demand for gold.
Fiscal deficits: Rising deficits in major economies are increasing gold’s appeal as a hedge against economic risks.
Monetary easing: Future rate cuts may have a diminishing effect on gold prices, according to HSBC.
ETFs vs. OTC: While ETFs see liquidations, OTC and real money purchases continue to support gold demand.
Central bank buying: Despite slowing, central bank purchases remain a key factor in gold’s sustained demand.
My Gold Stock Pick: Element79
Element79 Gold (CSE: ELEM) (OTC: ELMGF) (FSE: 7YS) is an innovative mining company focused on developing its gold and silver projects in highly promising regions. The company is gearing up to restart operations at its Lucero project in Arequipa, Peru, by 2024. Lucero, historically one of Peru’s highest-grade underground mines, boasts an impressive average grade of 19.0 g/t Au Equivalent (14.0 g/t gold and 373 g/t silver). This project is expected to drive substantial growth for the company.
In its peak production years, the Lucero mine averaged over 40,000 ounces of gold per year. Recent assays conducted in March 2023 revealed ore grades as high as 11.7 ounces per ton of gold and 247 ounces per ton of silver, further confirming the mine’s high-grade potential.
Element79 Gold is also engaged in community outreach, working to finalize long-term agreements with local stakeholders, including the Lomas Doradas artisanal mining association, ensuring sustainable and formalized mining activities. The company has also strengthened its balance sheet, utilizing proceeds from its Maverick project to support future operations.
Why Investing in Gold Now?Â
As global economic uncertainty continues into the fall, with ongoing geopolitical tensions, inflationary pressures, and potential interest rate adjustments by the Federal Reserve, gold has become an appealing safe-haven investment. Gold stocks, in particular, offer amplified exposure to gold price movements. As gold prices rise, mining companies often see enhanced profitability, potentially driving their stock prices higher. This amplification effect may allow gold stocks to outperform physical gold.
Gold stocks also provide diversification benefits during market volatility, as sectors facing economic headwinds may underperform while the gold sector can offer portfolio stability. Additionally, technological advancements in mining, such as automation and AI, are increasing operational efficiency for many companies, which could further enhance profitability and attract ESG-conscious investors. This could positively impact stock prices, even if gold prices stabilize.
Moreover, some gold mining companies have improved cash flows, leading to higher dividends for investors. In a low-interest-rate environment, these dividend yields may be more attractive than traditional fixed-income investments. Finally, increased merger and acquisition (M&A) activity in the gold sector offers potential for value creation through premium payouts or synergies from well-executed mergers, making junior mining companies with promising reserves attractive investment opportunities this fall.
Conclusion
Gold continues to shine as a safe-haven asset amid ongoing global economic uncertainty, with rising prices and steady inflows into physically backed gold ETFs. In September alone, ETFs attracted US$1.4 billion in new investments, largely driven by North American funds. These inflows, combined with record-high gold prices, pushed global assets under management to US$271 billion, marking a 5% increase. HSBC’s upward revision of its gold price forecasts further underscores confidence in the metal, with projections for 2024 now set at $2,395 per ounce. The continued demand, technological advances in mining, and increased M&A activity all highlight why gold stocks remain a strong investment choice this fall.
