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While geopolitical tensions may provide a short-lived rally in safe haven assets like gold, there is no denying that the metal is still in a long-term technical bull cycle that mirrors the beginning of 2008, said Chris Vermeulen, chief market strategist of TheTechnicalTraders.com.
Vermeulen told David Lin, anchor for Kitco News that gold is set to hi $2,700 an ounce in one year, and up to $7,400 in five years.
“I think we’re coming into a pretty major supercycle in precious metals. I think we started back in 2019 and this is about a five-year cycle for gold, and it has been a very tough year for equities, we’ve had a very long bull market, I think things are getting a little long in the teeth in terms of the equities side,” he said. “When the stock markets get to the late stages, this is where we see commodities come to life.”
Vermeulen added that this year, commodities and gold miners are set to outperform the broad equity index.
“We need to see how this market sells off,” Vermeulen said, referring to a scenario in which equities decline. “If it goes into [a sell-off] like we saw in 2020 where it is a panic phase and it goes straight down, it is going to pull gold, it is going to pull miners down, most likely. They’ll probably hold up the best and do okay, compared to the other indexes, but they’ll probably get sold off. Now, if the market chops sideways, and kind of a slow grind lower, that’s the perfect scenario for precious metals.”
While the dollar index has traditionally held an inverse correlation to gold, in the last three weeks the DXY has rallied concurrently with the metal. Vermeulen sees this trend continuing.
“We can still see the dollar and precious metals rallying together. They’re both seen to me as a very defensive play, a kind of global asset. When people get nervous, doesn’t matter where they are in the world, they’ll liquidate, and they tend to move to the U.S. dollar. We’ve seen this happen all the time,” he said, citing the Great Financial Crisis of 2008 as an example.
For more information on gold’s perfect storm and Vermeulen’s outlook for gold miners, watch the video above.
By David Lin
For Kitco News
