Gold rally: Buy or sell - what’s next?

Gold prices have been soaring to record highs, surpassing $3,000 per ounce, driven by a mix of geopolitical uncertainties, trade tensions, and inflation concerns. Richard Mubilu, a Mineral Consultant and Trade Analyst at Pearl Precious Metals in Uganda, shed light on the factors fueling the gold rally in a recent CNBC Africa interview. Mubilu highlighted the speculative activities surrounding gold as a safe haven asset amid escalating geopolitical tensions, trade uncertainties, and inflation worries. These factors have been prompting investors to flock to gold as a hedge against market volatility and economic instability. Despite facing some technical difficulties during the interview, Mubilu emphasized the crucial role of gold in times of global uncertainty and market turbulence. The mineral consultant also delved into the impact of the Federal Reserve's interest rate decisions on gold prices, noting the inverse relationship between gold and the U.S. dollar interest rates. A weaker dollar makes gold more affordable for international buyers, potentially fueling further price increases if the Fed signals rate cuts. Mubilu pointed out key signals to monitor, such as Fed rate decisions, inflation data, U.S. employment, and GDP reports, in gauging gold price movements. As a representative of a mining company in Africa, Mubilu discussed how African extractive minerals industries are poised to benefit from the surge in gold prices. Countries like Ghana, South Africa, and Sudan, among others, stand to gain from increased export revenue, stronger forex reserves, and job creation opportunities. However, challenges like illegal mining, regulatory issues, and fluctuating investment flows could hinder maximizing these benefits. The discussion also touched on the trends in institutional investments versus retail investments in gold. Institutional investors seeking safety and stability contribute to gold price volatility, while central bank accumulations help stabilize prices over the long term. Meanwhile, retail investors, particularly in emerging markets, are actively purchasing physical gold. Looking ahead, Mubilu forecasted strong gold prices in the next quarter, especially if geopolitical tensions persist and the Fed leans towards rate cuts. Potential risks to watch out for include a stronger U.S. dollar, surprises in U.S. policy decisions, and market disruptions affecting mining operations globally. When asked whether it is a good time to buy or sell gold, Mubilu emphasized the importance of gold as a valuable asset during uncertain times, with high demand as a safeguard against economic and political risks. Overall, the interview provided valuable insights into the factors underpinning the gold rally and its implications for investors and economies globally.