Golden Opportunity: Jefferies' Bullish Outlook Amid Market Corrections

Jefferies has issued a report encouraging investors to view potential corrections in gold prices as a prime opportunity for accumulation. Notably, gold has enjoyed a substantial rally, appreciating by 53.9% this year, following a 27.2% gain in the preceding year. Similarly, the unhedged gold-mining index surged by 131.8% this year, a remarkable leap from last year's 13.3% increase.

The report highlights the current near-vertical climb in both gold and gold-mining stocks, coupled with heightened media interest, which could signal an imminent correction risk. However, Jefferies' overall long-term perspective remains optimistic, recommending that investors use any price drops as a chance to buy. Gold recently breached the USD 4,000 per ounce mark, a new high in its sustained rally.

Historically, gold's performance is inversely related to real interest rates, a correlation that has recently weakened. This shift corresponds with unprecedented levels of gold purchases by central banks since early 2022. These purchases, partly sparked by the US's move to freeze Russia's forex reserves in February 2022, reached record highs of 1,080 tonnes in 2022 and continue robustly in subsequent years. Jefferies underlines there are no signs of this trend halting, reinforcing its bullish long-term stance. The report argues that gold may climb to USD 6,600 per ounce, paralleling its 1980 peak value when adjusted for US disposable income trends, amid ongoing dollar weaknesses.