Gold:’s Move Above US$1,900 Shows Precious Metals Likely Entering New Bullish Price Phase
In Part I of this research article, I tried to highlight the major market cycle phases that often drive volatility, uncertainty, and bigger trends in the US/Global markets as well as Precious Metals. Additionally, my team and I highlighted the technical confluence pattern that has setup as Gold prices have rallied above downward sloping price channels (price Flags) recently. This confluence of technical patterns, while we are transitioning into a post-COVID-19 global economy, suggests that excess credit/debt issues throughout the global financial markets are seeking safety in preparation for some type of market reversion event.
The recent move above $1900 in gold shows that precious metals are likely entering a new bullish price phase. We highlighted this in a May 3rd research article suggesting that a new advancing cycle phase may push Gold to levels above $2100. If our research is correct, Gold may continue to rally higher – reaching a peak sometime near mid-October 2021.
Our current Custom Metals Index chart shows the recent strength of the upside price trend in precious metals. Once Gold clears the $1960~$1965 level, prices should continue to advance to $2067, then $2305 moderately quickly. The $2067 level represents resistance just below the recent highs from August 2020 near $2087. It is important to understand how price moves in advancing/declining waves/phases over time. At this stage of the precious metals rally, which I believe is very similar to the 2003 to 2006 Gold rally, we may see Gold continue to rally higher while the US/Global markets continue to trend moderately higher. This is a shift in how capital is being deployed in anticipation of the US Fed and global central banks entering a tightening phase. This process also took place in 2005~2007 as the US Federal Reserve raised interest rates attempting to deleverage the markets in an orderly format. The major stock market indexes and precious metals continued to rally throughout this event because traders/investors had already started hedging risks of an unknown market event while the Fed continued to raise rates.
Currently, we know the US Federal reserve is planning on acting to potentially raise rates in 2022 or 2023 and there has been some discussion that the US Fed may need to take action earlier to avert inflation concerns. The similarities between the 2004~2007 gold rally to what we are seeing in Gold right now, are uncanny. We are seeing Gold rally to levels close to $2000 near an early stage of concern related to any potential deleveraging/reversion event. In 2004, Gold was trading near $350 and reached a high of $1923.70 in 2011 – a rally totaling over 450%. If something similar happens based on the recent price lows, Gold could rally to levels over $6500.
Our researchers are focused on a target level near $3750 right now. We believe the next advancing wave in Gold, over many months, will target $2300, then $3200, then $3750. See this research article from May 16th for more detailed price targets/setups.
by Chris Vermeulen |
