2024-03-29 12:19:00
Investing.com – It took investors on a rollercoaster ride in 2023, rising and falling throughout the first nine months of the year. But then gold shot higher, jumping from October lows to all-time highs.
The rally since last fall has surprised many investors, given concern that a rise due to flattening inflation would dampen demand for the precious metal, causing a decline in holdings of the SPDR Gold Shares ETF, the largest ETF backed by physical gold.
One analyst who wasn’t surprised is Bruce Cammish of “TheStreet Pro.” “Gold’s 8-year cycle has bottomed out,” he told investors on October 10, so gold will move higher, predicting higher prices for the yellow metal before it happens.
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Fed and gold
The Federal Reserve aims to formulate monetary policy that keeps inflation and unemployment rates low. Inflation had risen in 2022 due to smooth fiscal policies to reduce unemployment during the coronavirus lockdowns, which led to prices rising significantly.
In response, global central banks have adopted the most hawkish policy since Volcker declared war on inflation in the 1980s. The federal funds rate was raised from zero to 5.25%, creating significant headwinds for gold, which is priced in dollars.
The increase in interest rates succeeded in curbing inflation, pushing the US Consumer Price Index, from a peak above 9% in June 2022 to around 3.2% in February 2024.
As a result, the Fed is no longer under as much pressure to raise interest rates, causing the US dollar to fall and gold to rise.
Meanwhile, it is unclear if and when inflation will achieve the Fed’s 2% inflation target. However, the progress made so far has led to a shift in the Fed’s monetary policy and, more importantly, the Fed’s December summary of economic forecasts suggests that interest rates could be cut three times by the end of 2024.
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The gold price chart reveals a new target
Bruce Kammich has analyzed gold using technical analysis for over 50 years, and his experience in evaluating price, volume and technical analysis indicators, including momentum, led to his accurate prediction that gold will bottom in October.
Now that gold prices have skyrocketed to all-time highs, Kamic recently re-evaluated the charts for the SPDR Gold ETF.
“The daily trading volume chart shows an increase in volume over recent days,” Kamic wrote in March. “The OBV indicator has been showing strength since mid-February and is heading for a new high. The MACD is showing an upward trend above the zero line.” “
The Total Trading Volume (OBV) indicator examines the volume flow in the previous days and predicts the price and market direction in the following days using it. While the MACD indicator uses moving averages to determine the momentum of any tradable asset.
The SPDR Gold Shares ETF closed at $203 on March 27, and prices could rise in the coming period. Using the weekly chart, Kammich predicted the target price to be $271 for the ETF.
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The US economy will support gold in 2024
The Federal Reserve estimates that GDP will grow by 2.1% in 2024, down from 2.5% in 2023. Unemployment, although remaining low, is also expected to rise to 4% from 3.6% in 2023.
The slowdown in the economy and high unemployment rates may make next year difficult, especially in light of the uncertainty surrounding the presidential election year.
If so, gold may benefit from a lower dollar. Going back to historical data, the SPDR Gold Shares ETF more than doubled between 2008 and 2011 when global economies were strong and emerging from the Great Recession. Gold prices also performed well when the Federal Reserve began cutting interest rates in 2019 and the global economy was upended by the coronavirus in 2020.
If gold reaches its lowest level in 8 years, as Kamic assumed last October, interest rate cuts and investor uncertainty could help gold rise in the coming period.
Kamic picked gold mining stocks as his top investment ideas in 2024. Based on the charts, he thinks Harmony Gold (NYSE:) could rise to $10. He also set a target of $12 for Osaysco Gold (NYSE:).
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