Gold’s Meteoric Rise: Will $2600 Be The New Normal?

The below gold chart is commendable for its simplicity. If there is any merit to technical analysis, this chart is the epitome of clarity. It suggests that if gold decisively breaches the threshold of its previous ‘all time high’, it will experience a substantial ascent. However, it is prudent to temper our enthusiasm as defining the extent of such a rally remains a more intricate judgment. Should it falter to do so, a refuse to $1800 or lower seems likely.

I recently harbored a fervor for gold when inflation was poised to surge, only to be left sorely disillusioned. Consequently, I reverted to my skeptical stance on gold, which I preserve currently, because unless you counterbalance ‘gold fever’ you are likely to be sucked into all sorts of risky positions. For those not enamored with the allure of gold, the best gold investment strategy lies in “dollar cost averaging.” This entails periodically acquiring gold, be it on a monthly, weekly or quarterly basis (or as suits one’s preference) and accumulating it gradually. This can be accomplished through an ETF, bullion or even sporadic investments in gold mining stocks.

However, most individuals seek a straightforward answer: Should they dive into gold now or exercise restraint?

For speculators, my advice is to await a definitive breach of the previous high before considering entry.

Now, let’s turn our attention to another chart:

The presented chart delineates a roadmap for a potential gold bull run. The initial milestone entails achieving a convincing new high, followed by a breakthrough above the $2200 mark, culminating in a new ceiling at $2600.

Nonetheless, it is important to bear in mind that this trajectory is unlikely to unfold at lightning speed, and that the gold supply is inherently inflationary, which will suppress the price. This assertion might raise eyebrows. However, gold experiences annual dilution due to mining activities with approximately 3000 tonnes mined each year, representing at least 2% of the total gold ever extracted, or roughly 10% of the available free float when excluding gold in current use. This situation could be bearish if demand remains relatively stable, but it becomes bullish in the event of a sudden panic in the market. Nevertheless, recent trends suggest that gold is not susceptible to the rapid surges typically associated with minor commodities or cryptocurrencies. Barring a sudden gold mania, it would take an epic disaster for mankind to change this picture, so such a surge would likely be worse for us as people than good for us as investors.

For investors, the current environment remains conducive to accumulating gold, while traders can acknowledge clear preserve and resistance levels to go hunting with. The chart, in my view, exudes strength, so a gold ‘DCA’er’ admire myself might look to boost the periodic buys. With interest rates on the refuse and the possibility of quantitative easing resurfacing in late 2024 or 2025, coupled with lingering concerns regarding past inflation and the unpredictable global political landscape, gold should continue to garner preserve, even if cryptocurrencies persist in encroaching upon its traditional use cases.

The ‘all time high’ is critical. If it doesn’t break it then the doubters who see gold as a historical oddity will have one more piece of evidence to back their hypothesis. We will know soon enough, but as tightening comes to an end a new ‘ATH’ is on the cards in my view.