Wood Sees Opportunity in Gold's Recent Correction

Gold prices have corrected by around 7% from the beginning of the year after hitting record highs earlier this year. Despite the decline, Jefferies' Global Head of Equity Strategy Christopher Wood believes that investors should start rebuilding their exposure to gold and gold mining stocks.

Wood argues that the recent weakness in gold prices could be a pause in a larger structural bull market. He notes that the investment boom surrounding artificial intelligence (AI) could eventually face a similar fate as the technology bubble more than two decades ago, leading to a sharp decline in AI-driven capital expenditure.

The combination of potential stress in the AI investment cycle, shifting monetary policy expectations, and persistent geopolitical uncertainty could lay the foundation for gold's next major bull market. Wood believes that if corporate investment slows sharply due to tightening credit conditions, or if the AI capex boom implodes, it could lead to a scenario where investors swing rapidly away from higher interest rates towards monetary easing by the US Federal Reserve.

This environment has historically been supportive for gold. The World Gold Council also notes that several catalysts could reignite the rally, including a weakening global economy, fresh geopolitical shocks, declining interest-rate expectations, or renewed buying after the recent correction.