Gold has been an incredible ride this year, up 64% year-to-date. Silver has nearly doubled that return and gold equities are up a massive 130%. Naturally, after a run like that, the “take profit” crowd is starting to get loud.
However, Scotiabank released a note this morning titled “Here’s Why We Don’t Give Up on the Gold Trade,” arguing that they remain Overweight on the sector and see further upside ahead.
Their main argument? The “broad and synchronized” tailwinds that fueled this rally are unlikely to reverse next year.
Here are the 6 catalysts Scotiabank is watching:
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The Debt Spiral: This is the big one. US debt now stands at $37.6 trillion, up 65% in just five years. With no plan to return to fiscal equilibrium, government debt is expected to keep rising.
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Crypto Demand (Yes, really): A new whale has entered the chat. Stablecoins backed by physical gold are driving demand, with reports estimating Tether has already hoarded over 120 tons of gold to back its token.
- Fed Independence Risks: Markets are jittery about the Fed. If Trump appoints a dovish Chair, it could erode confidence in US institutions and intensify selling pressure on the dollar—a classic setup for gold.
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Trade Wars 2.0: With USMCA up for renewal next year and China negotiations continuing, elevated trade uncertainty is keeping the safe-haven bid alive.
- Weaker Dollar: Scotiabank remains bearish on the USD overall, viewing further declines as a direct boost for metals.
“But isn’t it overextended?”
It feels like it, but historically? Maybe not.
6) Scotiabank notes that while the recent run is amazing, it’s not unprecedented. They point to the late 1970s, where gold prices rose more than 6-fold and silver rose 9-fold. By that metric, this bull market might just be getting started.
From a valuation perspective, gold equities are actually trading cheaper than previous peaks. The sector is currently at ~7x EV/Fwd EBITDA, compared to valuations of over 10x observed back in 2010/2011.
The Play:
Scotiabank notes that many investors are actually still Underweight because they feel uncomfortable chasing a 60% rally
