Sprott Physical Gold

PHYS

Market cap $14.9B

It's no secret at this point that the price of gold has undergone tremendous performance as of late. In September, the price of the precious metal rose almost 12% to $3,859, an all-time high.

Gold doesn't appear to be losing its luster. The the precious metal hit another record high today by crossing the $4,000 per ounce price mark.

The Federal Reserve's recent rate cut of 25 basis points could amplify gold's current rally. Prices have already broken through the $3,700 price mark, and another record high could hinge upon how aggressive rate cuts will be in the coming months.

The prospect of interest rate cuts this month and through the rest of the year is elevating prices for gold, but silver is also benefiting. The precious/industrial metal crossed the $40 price mark in the first week of September, which it hasn't done since 2011.

Gold is in a secular bull market, driven by global de-dollarization and strong investment demand, especially from China and central banks. Despite a sharp rally, gold and PHYS show no signs of retail mania, with trading volumes and coin sales remaining subdued. China's mandate for insurance companies to allocate to gold could significantly tighten global supply, supporting higher prices.

Tariffs continue to be a wild card. Anxiety gripped the markets on Tuesday, pushing the price of gold past the $3,500 mark en route to a new all-time high.

Gold's demand drivers remained in the month of July, keeping prices afloat. However, for the rest of the year, gold's ability to sustain its rally could hinge on demand from China.

Central banks' willingness to buy more precious metals should help buoy prices for both gold and silver. Around the globe, central banks continue to quench their thirst for both, providing investment opportunities in ETFs with exposure to both metals.

I have a buy rating on Sprott Physical Gold Trust, citing strong fundamentals and a favorable technical setup for gold. Gold's momentum and sentiment dip is a healthy technical sign, with central bank buying and seasonality providing key tailwinds. Gold remains a top performer YTD, with Goldman Sachs raising its price target to $4,000/oz by 2026, implying nearly 20% upside.

Like all appetites, the consumer typically reaches some point of appeasement. That could be the case for central bank gold purchases, which have started to show signs of receding.