Gold prices have dipped below $4,000 an ounce, but WisdomTree's Nitesh Shah sees long-term value in the precious metal. Despite near-term volatility driven by inflation pressures and Federal Reserve tightening, Shah believes gold is trading close to fair value, offering an attractive opportunity for investors looking to hedge against economic risks.
Shah forecasts gold could rally back to $4,800 by the third quarter of 2027, though he cautions against expecting explosive gains. He notes that gold has shown resilience despite rising bond yields and a stronger U.S. dollar, moving closer to levels justified by fundamental models. The recent easing of yields and dollar weakness has helped stabilize gold prices.
One of the biggest challenges for gold remains the Federal Reserve's battle against inflation, exacerbated by the Middle East conflict. The latest Consumer Price Index (CPI) data showed a 0.4% increase last month, higher than expected. Shah argues that even without interest rate cuts, a signal from the Fed that it is done hiking could boost gold prices. He also highlights the role of new institutional buyers, including Chinese insurance companies and Indian pension funds, in supporting demand.
Shah warns that gold faces risks if investors question its safe-haven status, particularly during periods of high inflation and geopolitical uncertainty. However, he maintains that gold's defensive characteristics remain strong and that lower prices could unleash pent-up physical demand from retail investors. Ultimately, he emphasizes gold's strategic role in diversified portfolios.