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Gold's long-term investment case may be strengthening, but recent price volatility has left investors questioning whether the precious metals rally has further room to run.
At this year's New Orleans Investment Conference, a panel of market experts argued that while the near-term outlook is increasingly complicated, the underlying reasons to own gold remain straightforward.
The annual panel on precious metals, moderated by Kerry Stevenson, founder and chief executive of the Australian Gold Conference, brought together Dana Samuelson, Alasdair Macleod, Rich Checkan and Omar Ayales to examine the outlook for gold, silver and other precious metals amid rising government debt, persistent inflation, widespread geopolitical uncertainty and shifting demand trends.
One question stood out: Has the precious metals industry made investing in gold too complicated for newcomers?
For Alasdair Macleod of Macleod Finance, the answer is largely yes. He argued that investors should look beyond short-term price movements and understand gold's fundamental role as money and a store of value.
"Gold is pretty constant," he said, explaining that what changes is the purchasing power of currencies.
For that reason, rather than viewing gold as another asset to trade, market participants should recognize that holding the yellow metal is a way to preserve wealth as the value of paper currencies erodes.
That distinction is particularly important as investors navigate increasingly complex economic conditions. While gold's price can fluctuate, the panelists argued that mounting government debt and the inability of policymakers to address structural spending problems provide a longer-term foundation for precious metals.
Gold's long-term case vs. short-term volatility
Despite their positive long-term outlook, the panelists didn't dismiss the recent precious metals selloff.
Dana Samuelson, president of American Gold Exchange, pointed to technical damage in both gold and silver, noting that gold had slipped below US$3,950 per ounce, while silver had fallen below US$50 per ounce . Both metals were trading below their July lows, creating a technical setback that could take time to repair.
Omar Ayales of Gold Charts R Us also warned that investors should prepare for a period of downside consolidation rather than assume prices will quickly resume their upward trajectory.
From a technical perspective, he views the breakdown as significant, and suggested the market could experience a prolonged period of weakness. He estimates that the consolidation could last a year or two, emphasizing that this does not necessarily invalidate longer-term positions.
Watch the full interview with Ayales to hear his thoughts on the trajectory of the gold market.
The recent weakness also reflects broader changes in currency and energy markets. Ayales noted that higher oil prices have become a source of support for the US economy and the dollar, while weakness in European and other major currencies has contributed to the greenback's relative strength.
That combination creates a challenging environment for gold, which typically benefits from a weaker US dollar.
For his part, Rich Checkan, president and COO of Asset Strategies International, encouraged investors to maintain a longer-term perspective. For him, gold is not a short-term trade, but a form of wealth protection.
"I think it's my wealth insurance, and I don't sell it unless I have some sort of crisis," he said.
He acknowledged that political developments and potential geopolitical events could create additional headwinds for gold in the near term. However, he maintained that the longer-term investment case remained intact.
Debt, inflation and the erosion of purchasing power
The panel's bullish outlook ultimately came back to one central concern: government debt.
Checkan questioned whether investors genuinely expect elected politicians to reduce government spending, pointing to the enormous cost of servicing US debt and the inflationary pressures associated with continued borrowing.
Listen to the interview with Checkan to find out what's next for the precious metals market.
He cited annual US debt-servicing costs of approximately US$1.6 trillion as evidence of the growing burden.
Macleod took the argument further, suggesting that investors need to shift their focus from inflation figures to the declining purchasing power of currencies. He argued that governments may be able to influence reported inflation, but that does not necessarily prevent currencies from losing value over time.
The panelists also questioned whether central banks have the flexibility to raise interest rates sufficiently to restore positive real returns without creating further economic and financial instability.
Checkan highlighted the difference between the debt environment of the early 1980s, when then-Federal Reserve Chair Paul Volcker aggressively raised interest rates to combat inflation, and today's much larger debt burden.
The US government now carries approximately US$40 trillion in debt, he said, compared with roughly US$1 trillion during the earlier period. For Ayales, that creates a difficult backdrop for traditional portfolio diversification.
Historically, investors have turned to government bonds during economic downturns. However, larger fiscal deficits and declining tax revenues could increase government borrowing requirements, potentially pushing bond yields higher rather than providing the traditional safe-haven protection.
As a result, he sees gold becoming an increasingly important place for investors seeking to preserve purchasing power.
Precious metals demand still has room to grow
Despite gold's strong performance, the panelists said investor participation remains relatively limited, particularly in the US. Checkan referred to a World Gold Council survey in which about 75 to 80 percent of respondents reportedly agreed that gold should have a place in an investment portfolio. Yet actual allocations remain comparatively small.
He identified two major barriers: a lack of trust in the precious metals industry and insufficient investor education.
"The first reason — (people feel they) cannot trust precious metals dealers, and that is a horrible but absolutely earned reputation in our industry," he said. The second obstacle, Checkan argued, is that many investors simply do not understand the role precious metals can play in a portfolio.
Samuelson explained that American investors have historically been less inclined to hold physical gold than investors in countries that have experienced currency instability or financial crises. The US dollar's longstanding position as the world's reserve currency has provided a sense of security that has reduced the perceived need for alternatives.
However, he believes that could change if equity markets experience a more significant breakdown.
Watch the interview above to hear more from Samuelson on what signals gold and silver are sending.
"Fear is the biggest driver of precious metals buying in the US," Samuelson said, explaining that investors typically become interested in physical gold when confidence in traditional financial assets begins to weaken.
For the panel, this represents an important source of potential future demand.
Silver and platinum face different market dynamics
While gold dominated much of the discussion, the panelists also spoke about distinct supply/demand factors affecting three other precious metals: silver, platinum and palladium.
Samuelson pointed to weaker Indian silver demand as an important contributor to recent market weakness.
He explained that government restrictions and taxes on silver imports have reduced buying from a market that played a significant role in supporting prices during the previous year. However, he believes the sector is approaching a point where supply and demand could begin to rebalance, creating the conditions for a recovery.
Macleod was more constructive, describing silver as relatively inexpensive and suggesting that its price could eventually catch up with gold and the broader commodities complex. He also noted that a rising gold price could eventually encourage investors to move into silver as they seek exposure to precious metals at lower nominal prices.
Platinum and palladium, meanwhile, face additional industrial considerations, including their use in automotive catalytic converters. Samuelson suggested that weaker industrial activity and subdued Asian demand are contributing to pressure across these markets.
Energy markets present another risk
Looking ahead, the panelists identified energy prices as a key variable for precious metals investors to monitor.
Samuelson warned that the global economy has already experienced months of higher energy costs, while further military escalation could create additional supply disruptions and inflationary pressures.
He singled out diesel as particularly important because of its widespread use throughout the economy and its influence on transportation and production costs.
Ultimately, the discussion returned to the importance of maintaining perspective during periods of volatility.
Samuelson advised investors against trying to identify an exact bottom, suggesting that accumulating positions during market weakness is a more effective approach than making emotionally driven decisions.
The precious metals market may be complicated by technical indicators, currency movements, energy shocks and geopolitics. But the panelists' central argument was that investors should not lose sight of the bigger picture.
As government debt expands and confidence in traditional financial assets faces growing challenges, gold's role as a store of value could become increasingly relevant. The challenge for the industry is making that case clearly enough that investors understand why they might want to own it — before the next crisis makes the decision for them.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.