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CNA explains: Why did gold and global markets reach all-time highs at the same time?

Should retail investors step in or look elsewhere?

When asked if it was “too late” for retail investors who hold little or no precious metals and stocks to add blue-chip assets to their portfolios, the chief investment office of DBS said: “Time in the market is better than market timing. Instead of trying to peak or bottom, investors would do well to maintain a disciplined approach to investing.

“We emphasize the importance of leveraging cash through a well-diversified portfolio that utilizes our barbell strategy, including exposures to income-generating bonds on one side and quality growth stocks on the other.

“In a world characterized by economic and geopolitical uncertainties, this will provide a solid basis for generating appropriate returns throughout economic cycles.”

Mr. Menon said that, overall, OCBC remains “constructive on the investment outlook for 2024, assuming that underlying U.S. inflation declines and the U.S. economy avoids a crash landing.” brutal as the US central bank cuts rates.”

“If this scenario plays out, it could prompt cash-rich investors to return to markets more broadly, potentially fueling a multi-year recovery like we saw in the 1980s when the Fed finally won the battle against inflation. and reduced fares,” he said.

“With nearly $6 trillion sitting idle in U.S. money market funds, there is clearly an abundance of liquidity that can provide stock markets with firepower in 2024 and perhaps beyond. »

However, Mr. Menon said “it would be prudent for investors not to get too exuberant about the prospects and jump headlong into the stock markets now.”

“It makes sense to stay invested, but it’s also important to be aware of the risks,” he said.

“Perhaps time diversification could be a good strategy to adopt for 2024, in which new investments would be made gradually over several months instead of investors trying to time the markets.

“As an additional risk management measure, be sure to maintain a diversified portfolio of stocks and bonds to avoid concentration risk.”

Analysts also agree that gold prices have not yet peaked.

Mr. Gregerson said that even though gold has reached new highs recently, it “still has a long way to go as a hedge against inflation and currency crises, and if held for the long term, it constitutes a form of prudent saving.”

“Since 1970, the average annual appreciation of gold in U.S. dollar terms has been approximately 7.8 percent per year. We believe that over the next decade, gold will exceed this annual return,” he said. he added.

UOB’s Mr Heng said the bank maintains its “positive outlook for gold” and expects the gold price to reach US$2,300 per ounce by the first quarter of 2025. This figure is up from US$2,200 per ounce in the fourth quarter. of 2024, he predicted in December last year.

“Once the US dollar and interest rates start to fall more significantly in the second half of the year, as the US Federal Reserve begins to cut rates, gold will be propelled even higher,” a- he declared.

“We reiterate our long-term view that gold is a good risk diversifier in a portfolio and has embarked on a sustained rally above US$2,000 (per ounce).”

The $2,300 figure is also OCBC’s 12-month gold target, according to Menon.

For investors looking for an alternative to gold in the precious metals sector, silver is an option, Gregersen said.

“Based on the gold-to-silver ratio, which measures the relative price of these two metals, silver is currently significantly undervalued, being 89 times cheaper than gold, and should be considered a good alternative to gold. ‘gold,’ he said.

“Silver is also an essential metal for the production of solar panels, accounting for approximately 10 percent of solar panel production costs. We believe the increasing scarcity of silver – 2022 saw a global supply gap of 23 percent – ​​and the role of green energy are not yet fully appreciated by businesses. the steps.”

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