Why the price of gold is surging

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

RBC Capital Markets natural gas and gold strategist Christopher Louney noted an uncertainty premium in the gold price,

“We’ve argued numerous times this year that while macro factors have pushed and pulled gold within an established range since early Q2, the absolute price level is not fully explained by major macro variables alone. In fact, when we isolate each macro variable, we see that gold tends to look over valued by most measures. While to some extent this could have something to do with forward expectations for these macro variables (rates, Fed policy, the dollar, market valuations , etc.), we struggle to justify current prices based on any of the major macro variables we have historically relied upon in our models on their own. Instead, given our expectations for both official sector (+857.2t forecasted in 2025) and investor interest (ETPs +697t in 2025), we take an admittedly more risk and uncertainty-based view on gold prices and flows. While macro variables can drive and keep gold range bound, support is coming from gold’s unique appeal as a perceived haven that is not another party’s liability…we get the sense that gold markets are pricing based on risk and uncertainty rather than the just influence of macro variables alone, and thus gold price expectations should be rebased to higher levels. In this piece we shift our previous middle and high scenarios ($3176/oz and $3496/oz in Q4 2025, and $3195/oz and $3372/oz in 2026 , respectively) to low and middle scenarios, respectively, and launch a new high scenario ($3722/oz in Q4 2025 and $3789/oz in 2026)”

RBC Capital Market precious metals analyst Josh Wolfson has “outperform” ratings on Royal Gold Inc., Gold Fields Ltd., OR Royalties Inc., Sandstorm Gold Ltd., Anglogold Ashanti PLC and Agnico Eagle Mines Ltd.

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Morgan Stanley strategist Ariana Salvatore published an interesting explanation for market strength despite political uncertainty,

“The economy and markets have been telling diverging stories: macroeconomic data point to an incrementally weakening environment, while the S&P 500 has posted positive YTD performance after April’s significant low. We think the difference can be explained by looking at sectoral impacts of policy choices and assessing those sectors’ share of the overall S&P 500 market cap. For example: tariffs are a clear headwind to margins for certain industries, but the overall market cap weight of these groups is limited. Conversely, the OBBBA benefits sectors with large weights in the index due to provisions like upfront R&D expensing and bonus depreciation. These create cash flow benefits for sectors with an outsized share of market cap … Liberation Day marked peak uncertainty and peak concern around tariffs for equity investors, and we believe the market is now focused on a rebounding earnings backdrop … Industrials should continue to see policy-driven tailwinds from near-shoring and domestic AI investment, justifying outperformance vs. the benchmark, and the space also has stronger pricing power”

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BofA Securities investment strategist Michael Hartnett covered some eye popping investment allocations in his weekly Flow Show report,

“The Biggest Picture: record $97bn inflow to global bond funds past 4 weeks, YTD bonds annualizing record $700bn inflow, led by inflows to IG bond. Coming Soon: Aug 27th NVDA, 29th PCE, Sep 5th payrolls, 10th PPI, 11th CPI, 17th FOMC. Flows: inflows to bonds $23.0bn, stocks $3.0bn, cash $1.3bn, gold $0.1bn, outflows from crypto $0.7bn. Flows to Know: IG bond inflow past 4 weeks biggest since Jul’20 ($57.4bn), Europe equity outflow biggest in 4 months ($2.3bn), German equity outflow biggest in 3 months ($0.4bn), 18th week of UK equity outflows ($1.3bn, biggest in 3 months)”

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Bluesky post of the day:

Diversion: “New mRNA Cancer Vaccine Delivers Stunning Results, Sparks Universal Treatment Hopes” – SciTechDaily