Where does gold go from here?

After surging nearly 44% over the past 12 months, gold prices couldn’t have further to run, right? Wrong—at least if you ask senior market strategist at the World Gold Council, Joseph Cavatoni.

Read on for his conversion with Brew Markets about the future of gold, edited for length and clarity.

What do you say to people who look at gold’s run and think, ‘I missed the rally, it’s too expensive now?’

As an organization, we don’t call the gold price. But we’re going to give you a strong case that investment in central banks will keep buying at paces that are strong.

JPMorgan’s making a case for $4,000/oz, and we’ll balance that with Citi, which is arguing a pullback of $3,000/oz.

The case remains strong for upside performance, and if you’re looking closely at the price, you can maybe pick your entry point a little better.

What is driving central banks around the world to keep buying gold?

First, they've got concerns around global inflation, even in their own homegrown economies. Second, they look at risk and uncertainty and its impact on the other assets they may be holding, which includes dollar-based assets.

And third, they need certainty around liquidity, and are making sure that when they are exercising liquidation of an asset for whatever the reason may be, they want to stabilize it using gold holdings so they could sell gold by their currency, like we saw in Turkey, two years back.

How do you see lower interest rates affecting the price of gold, when the Fed does eventually cut rates?

It'll overall lower the opportunity cost of holding assets away from gold. So it'll actually continue to support the case for investors to realize the value of holding gold as a diversifier in your portfolio.

Do you think bitcoin, aka “digital gold” will take market share away from gold as a safe-haven asset long term?

Bitcoin, first and foremost, is an interesting asset. What I’d say is that in terms of the characteristics of returns, diversification benefits, liquidity and overall portfolio impact is that it’s akin to a risk asset. It looks an awful lot like a tech stock.

During drawdowns, bitcoin will draw down like risk assets will, while gold actually holds its value.—LB