Harry Mamaysky, a Columbia Business School academic and QuantStreet Capital member, predicts the Federal Reserve’s forthcoming actions might make gold an attractive asset again. Mamaysky asserts the ongoing rollback of quantitative easing along with rising inflation may fuel stronger demand for gold. As investors look to guard against market volatility and falling dollar value, gold’s traditional role as a safe haven may rise in popularity.
Mamaysky’s analysis suggests that Bitcoin’s current value has caused the gold price to drop comparably in Bitcoin’s terms. This supports an observable shift in the investment landscape, favoring digital solutions over traditional safe-havens like gold. Nonetheless, the principles justifying investments in Bitcoin are equally admissible for gold – decentralized control, guarding against inflation, and ease of trading through ETFs.
In addition to its universally acknowledged value, gold is easily traded and is not directly influenced by any government or institution. Like Bitcoin, gold is considered a guard against geopolitical risk and monetary policy errors. Gold’s repute as a value store throughout human history emphasizes its reliability as an investment. The availability of liquid ETFs further bolsters gold trading.
Mamaysky anticipates the Federal Reserve embarking on an easing cycle by the end of 2024, possibly boosting gold prices. By studying Federal fund target rate patterns over the past fifty years and identifying eleven easing periods since the 1970s, he concludes that these periods typically induce notable increases in gold prices. This, he posits, arises from the inverse relationship between interest rates and gold’s value.
When the Federal Reserve reduces the interest rate, gold typically becomes more appealing to investors, thereby pushing its price up. Further, he indicates historical instances where gold prices increased following easing cycle initiations. He underscores contributing factors like inflation rates, global upheaval, and broad economic uncertainty which tend to augment gold’s attractiveness as a safe place.
Mamaysky’s analysis of gold futures prices shows that without considering a minor easing phase in 1995, gold futures remained stable or increased for two years following each easing period start. In the two years post each Federal Reserve easing phase initiation, gold futures prices saw an approximate 20% rise. Anticipating the Federal easing cycle to start around July 2024, Mamaysky’s machine learning-backed forecast model predicts an approximately 8.46% rise in gold prices over the next year.
