Why is the price of gold rising and where is it headed?

The gold market has seen an impressive rally since the beginning of this year, which marks just the beginning of a long-awaited bull run, according to financial expert Dennis Gartman. In an exclusive interview with Kitco News Gartman, known for the Gartman Letter, shared his insights on gold's recent performance and the broader economic context that underpins this movement.

Gold breaks through to new heights

Gartman previously warned investors about the so-called 'triple tops', which are known to eventually be broken. For example, gold has recently reached new all-time highs, with a price of more than $2,170 per ounce. He sees this breakthrough as a warning sign, especially given the protective role gold plays in times of economic uncertainty and the impending recession that threatens to drag down overvalued stock markets.

A turning point in the market

Tuesday may have marked a turning point for gold. While both the S&P 500 and Bitcoin struggled to maintain their all-time highs, gold remained steady. This resilience of gold, amid the volatility of Bitcoin and the decline of the S&P 500, is a sign that investors cannot ignore, according to Gartman.

The worries about the US debt

One of the reasons for Gartman's pessimism about the economy is the rapidly growing U.S. national debt, which is increasing by about $1 trillion every 100 days, according to a Bank of America report. Gartman expresses concern about this exponential growth and its implications for future generations.

The Fed and the Future of Interest Rates

Despite the fight against inflation, Gartman predicts that the Federal Reserve will eventually have no choice but to cut interest rates. Jerome Powell, Fed Chair, has confirmed that rate cuts are on the agenda, but not immediately. Gartman expects that interest rates will have to fall to around 3 percent within a few years to cope with the growing debt burden.

Gold to $3,000 per ounce?

With the increasing debt burden and the Federal Reserve's expected actions, Gartman predicts that gold could rise to $3,000 per ounce or even higher in the coming years. He emphasizes that the Fed is likely to become the main buyer of debt, which will Gold price will increase further.

The Value in Mining Stocks

In addition to his optimism about gold itself, Gartman sees particular value in mining stocks. He has invested in the VanEck Gold Miners ETF (NYSE: GDX) and highlights that these stocks are currently highly undervalued, presenting a unique opportunity for investors.

China's insatiable hunger for gold

While Western investors seem to be shunning gold, China continues to accumulate gold, with a Recent Purchase of 12 tons in February. This brings the country's gold reserves to a total of 2,257 tonnes. The ongoing purchases by the People's Bank of China underscore the global demand for gold and support the price above the critical mark of $2,000 per ounce.

Conclusion

Gold is at an impressive inflection point, driven by economic uncertainty, an oValued stock market, and increasing public debt. As the Federal Reserve prepares to eventually cut interest rates, gold remains a safe haven for investors. The undervaluation of Gold Mining Companies also offers unique investment opportunities. At the same time, insatiable demand from central banks, with China leading the way, remains a key pillar of support for gold prices. Gold is not only on its way to new heights but is also establishing its position as a crucial part of a diversified investment portfolio.