Both Gold and Silver have recently been trading higher in response to continued concerns that the trade war between the U.S. and China will get worse before it gets better and any sort of resolution is achieved. Still on the table is the initiation of new tariffs on the remaining $300 billion worth of Chinese imports sent to the U.S. to go into effect later this year. A longer-term inflation fear is, If the global economy goes into recession, and central banks combat that with extremely easy money, this currency debasement will give Gold I lift. As of now, geopolitical concerns are not necessarily driving the price of Gold.
Looking at Gold technically (see chart), it could rise and challenge its old highs around $1900 (per once) over the next year. After which, it would have a pullback to $1500 to $1600 (50% retrace ) and build a longer to term upward wedge formation. As a market builds momentum in a direction it typically starts forming a steeper trend from the original longer-term trend line – we could see this in Gold.
After wiggling and flirting with the old highs at $1900, we could see a break out to new highs. The length of this rally typically will be the length of the wedge (from $1100 to $1900), which gives Gold a long term upside target of about $2700, this may take 2 to 4 years, however. Of course, if some “event” occurs, Gold always is capable of exploding on geopolitical fears that are extraordinary.
Cryptocurrencies have eaten into the luster of Gold. Especially in the third world, cryptocurrencies have been used as a vehicle to store value against debasing currencies. Cryptocurrencies may do better than Gold because they are easier to trade, store and move. Nevertheless, Gold historical has a lot more history in hedging against government currency debasements. The potential in Gold is not necessarily radically fantastic, but it is set to nearly double in the next 4 years – not bad. It could make it an interesting in investment – perhaps worth 5 to 10% of your portfolio at this time. Historically Gold has not been a great investment relative to stocks.
A video presentation of this subject: