Although the gold market has struggled to attract fresh bullish momentum after its recent string of record highs, one market analyst said the rally in gold prices is far from over.
Chantelle Schieven, chief research officer at Capitalight Research, said in a recent interview that while the recent slowdown in the pace of interest rate cuts by the Federal Reserve may continue to put pressure on gold prices as investors adjust their market expectations, geopolitical uncertainty continues to support the precious metal.
Schieven pointed to geopolitical turmoil as a key factor in gold's nearly 30% rally this year. However, she added that gold's safe-haven premium remains low as investors are only beginning to focus on specific geopolitical flashpoints, primarily the escalating conflict in the Middle East, where an Israeli attack on Hezbollah sparked an Iranian ballistic missile attack.
As a safe-haven asset, rising geopolitical tensions could easily push gold prices up 10%, she added.
“In this scenario, $3,000 an ounce is not out of reach,” she said. “If we see an escalation in the conflict in the Middle East, I would expect gold prices to reach $3,000 an ounce by the end of the year. But if tensions ease, we could also see a 10% pullback in gold prices.”
Looking beyond short-term volatility, Schieven said gold remains well supported as long-term factors begin to come into focus. She described gold’s potential as something that could change the market.
She said, "We are seeing the factors affecting the gold market now, which we have been watching and discussing for 16 years. We have always seen growing debt as a long-term factor driving gold prices, but one day, long-term problems will become current concerns. All the small things we have seen in the past two years are now starting to accumulate, and this is what drives gold prices higher."
Schieven noted that despite the strong gains in gold prices over the past year, the precious metal has only just entered a new bull market cycle. She said, "We are far from the peak of this gold cycle. We haven't even reached the frenzy stage where prices are really rising."
Schieven said she remains bullish on the long-term outlook because it is hard to see how the current favorable environment will change. She noted that even if the Russia-Ukraine conflict ends, there will still be a deep distrust among countries around the world. She said that distrust will continue to weaken the dollar as countries work on new trade agreements and reduce their reliance on the dollar.
“The world is moving away from globalization,” she said. “The dollar is not going away, but its role is diminishing, and as countries look for alternatives, they will continue to buy more gold.”
At the same time, Schieven said that rising sovereign debt levels, including in the United States, are undermining the purchasing power of all fiat currencies. Although the U.S. government will have a new leader next year, Schieven pointed out that neither presidential candidate has addressed the U.S. debt problem, which now exceeds $35 trillion, and that government deficits will continue to grow regardless of who is in power.
She added that in addition to geopolitical uncertainty, the threat of a global debt crisis is the biggest risk facing the global economy. “Central banks can’t keep interest rates high, so there’s more uncertainty about inflation, and that factor alone will keep the bull market in gold and silver going for the next few years in my opinion,” she said.
Schieven said that while gold prices may fluctuate in the short term, ultimately the metal will reach the $3,000 an ounce level in a sustainable bull market.
Article forwarded from: Jinshi Data
