Given the magnitude of the gold price surge over the past month, there are a few implications for investors to be prepared for. Taking these results into account, MKS PAMP set important upside and downside targets for the gold price. Meanwhile, Bloomberg Intelligence strategist Mike McGlone says gold will never look back.
MKS’s upside and downside targets for gold price
cryptocoin.comAs you follow, the gold price is trying to hold on to the $2,000 level. In this environment, MKS PAMP set important gold price targets up and down. “We know the story and narrative of why there has been a respectable bull trend since November 2022,” says Nicky Shiels, head of metal strategy at MKS PAMP. Last month, gold quickly crossed the $1,900 and $2,000 levels, hitting new record highs in many currencies, including the Australian dollar. Shiels comments:
This has been a repricing (eerily similar to the 2020 and 2022 moves in size/space) indicative of a macro regime change. Typical low-volatility, safe-haven, reserve currency assets, such as gold, often do not expand into new territory unless there is faith, despite lack of liquidity. So where can pricing go?
MKS’s upside targets are $2,070-2,075, $2,200, $3,200, $3,500 and $3,600. Gold’s downside targets are $1,900-1,920, $1,850, $1,780 and $1,560-1,600. Shiels defines the $2,070-$2,075 range as a double top that gold must cross for the rally to continue. This range marks the highs of 2022 and 2020.
Gold could rise to these levels if it imitates 2008-2011!
According to MKS, the gold price will reach bull market status at $2,200, up 20% during the year. “It’s certainly not unreasonable for the Fed to turn around when economic growth and/or something else (bigger) in the financial or broader economy is pushing its hands,” Shiels wrote in a note. The upside target of $3,200 means gold doubles from this cycle low of $1,600. Shiels comments:
Gold has doubled from Lehman’s low to a 2011 high of $1,921 in roughly three years as the Fed initiated QE. Faking 2008-2011 gets gold to $3,200 by 2025.
The $3,500 target will require a more extreme scenario of massive global debt, rising inflation and a reconsideration of fiat currencies. “Gold is very resilient to increases in the (CBO) US government federal debt, which is expected to nearly double to 200% of GDP by 2050. This brings the gold price implied by the model to $3,500.” Nicky Shiels describes the $3,600 scenario as “a major structural break in XAUJPY, where prices rise 75% above a long-term ceiling, as a preview of ‘what might happen’ in XAUUSD.”
How far can the gold price go down?
On the downside, the first significant support for gold is in the $1,900-1,920 range. Shiels said, “There are a number of notable events occurring under $1,900. Russia invaded Ukraine when gold was $1,900, and the United States imposed the first sanctions on the Russian Central Bank when it was $1,920.”
At $1,850, the collapse of Silicon Valley Bank occurred, triggering the banking crisis and the recent jump in the price of gold. Shiels says market sentiment will suffer if gold dips to $1,780-1,800 levels. He explains his views on this matter as follows:
These reversals from peaks in 2011, 2020 and 2022 have been incredibly steep and sharp, with prices dropping 20% / 10% / 8.5% in 14/3/6 days respectively. On average, a similar reversal would bring gold down more than $250 (13%) to $1,780 in 8 days.
The last downside listed is $1,560-1,600, which marks the price floor of gold. “The base at which the current bull market trend formed after the Fed ended its regime of 75 basis points increases and coincidentally (or not) coincides somewhat with the level at which Covid emerged in China,” Shiels said. This has been the ultimate game changer/background for the current setup,” he adds.
“It is inevitable that gold will never look back again.”
Mike McGlone, senior macro strategist at Bloomberg Intelligence, warns that for the crypto market Bitcoin and Ethereum may experience a pullback in the near term, he thinks gold will benefit the most from the ongoing financial turmoil. In this context, McGlone makes the following assessment:
I think it’s inevitable that gold will rise above the $2,000 level and never look back again. The most important catalyst is the potential downturn of the stock market. I see this as a catalyst for the rise of gold. It’s one of the few commodities I’m truly bullish on. Because everything is starting to lean downward towards deflationary trends. Deflation in fossil fuels encourages underlying inflation. I think this is just starting to take effect.
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