Gold prices surged again this week amid the potential escalation of geopolitical tensions and Moody's downgrade of the US sovereign rating last week. According to an analyst, gold is in the early stages of a robust, long-term bull market and is expected to rise to $4,500 per ounce.
Jordan Roy-Byrne, a technical analyst and editor of *The Daily Gold*, pointed out that gold prices broke out of a 13-year cup-and-handle formation in March last year, marking a significant technical confirmation. Now, the drivers of the macroeconomic landscape are aligning, with the market witnessing rising US Treasury yields, a prolonged bear market in bonds, and a collapse in credit quality.
He emphasized that similar macroeconomic backgrounds and technical conditions were present in the early stages of gold bull markets in 1930, 1972, and 2002. Additionally, gold prices have outperformed the S&P 500 Index and the 60/40 portfolio, and inflation-adjusted gold prices have just broken above a 45-year low.
Roy-Byrne stated that it is entirely possible for gold prices to reach $3,700 by the end of the year, and historical experience suggests that gold prices will reach $4,400 to $4,500 within the next 12 months. Furthermore, silver prices are also expected to surpass $100.
Optimistic Outlook for Gold and Silver Investments
The upward momentum in gold prices has also been recognized by other institutions. Imaru Casanova, portfolio manager of the VanEck Gold and Precious Metals Fund, noted in a report released earlier this month that gold is building a solid foundation above $3,000 during a new consolidation phase.
She emphasized that gold's pullback from $3,500 last month is not surprising and does not pose a significant concern. Currently, only about 1% of global assets under management are allocated to gold. As investors continue to increase their exposure, gold prices are expected to be significantly pushed higher.
She believes that, based on the historical correlation between ETF open interest and gold prices, if ETF open interest returns to its peak level in 2020, gold prices could rise by an additional $600. Therefore, it is not too late for investors to start increasing their holdings of gold or gold stocks now.
The institution predicts that gold prices could reach $5,000 within the next five years. The investment outlook for gold remains optimistic.
Beyond gold, Roy-Byrne also highlighted investment opportunities in silver. He pointed out that $35 and $37 will be key levels for silver prices to break through, and once silver surpasses $50, it could double to $100 within the next 12 to 15 months. Currently, silver prices are at a 45-year low.
