Nothing last forever, but the gold rally might try

NOTHING LAST FOREVER, BUT THE GOLD RALLY MIGHT TRYWhile most of the market darlings from 2024 - U.S. stocks, big tech, cryptocurrencies - have lagged this year, there's one asset that has carried last year's performance into 2025: gold.After a 27% jump last year, gold is up over 12% year-to-date and remains in close proximity to its all-time high of $2,956.15 reached last month.Strategists at Macquarie believe the rise can continue, at least until the third quarter of this year. They've raised their gold price forecast to a Q3 average peak of $3,150 and see the price reaching as high as $3,500."We view gold's price strength to date, and our expectation for it to continue, as primarily being driven by investors', and official institutions', greater willingness to pay for its lack of credit or counterparty risk," Macquarie says. "This is reflected in it already reaching nominal all-time price highs, even as the opportunity cost of holding gold (as a zero yield asset) has been relatively high."Next on the agenda for gold bugs is U.S. budget legislation, but Macquarie believes the U.S. budget deficit will deteriorate further. "Tariff revenues, savings achieved by the Department of Government Efficiency (DOGE) and potential cuts to Medicaid (are) insufficient to fully offset extension of the Tax Cuts and Jobs Act," they say. "Against this challenging fiscal backdrop, and that of many advanced economies, gold prices are likely to remain historically elevated."The continued strength this year has taken Macquarie by surprise, with gold effectively reaching their Q2 forecast already, however, the market is not showing any signs of froth, they note.(Samuel Indyk)*****EARLIER LIVE MARKETS POSTS: EUROPEAN EQUITY VOLATILITY AT ONE-WEEK LOW CLICK HEREBREATHING SPACE CLICK HEREMORNING BID: TARIFF WORRIES WEIGH AS CPI CHEER FADES CLICK HERE