The gold market, defying expectations with its climb above $2,500, continues to display upward momentum, with one analyst forecasting even more room for growth.
Florian Grummes, Managing Director at Midas Touch Consulting, highlighted in his latest report that gold’s recent surge to a new record high aligns with his November 2023 price target. He suggested that this breakout above $2,500 could signal the start of a clear trend phase.
Grummes noted that gold’s orderly uptrend is a strong indicator that prices may continue to rise. This outlook comes as gold consolidates its recent gains at high levels, with December gold futures last trading at $2,551.70 an ounce, a slight dip of 0.14% on the day.
“Overall, the weekly chart is bullish and suggests higher gold prices in the coming weeks, despite negative divergences. The rally, which began on October 6, 2023, hasn’t yet experienced a dramatic finale, indicating that significant upward potential may still exist,” Grummes explained. He added that historically, prolonged upward movements in the gold market often end with a rapid, vertical surge, followed by a sharp crash where gains are quickly lost.
Should gold enter such a euphoric phase, Grummes believes prices could briefly hit $2,700 an ounce. However, in the near term, he anticipates that prices might test support levels between $2,485 and $2,430 an ounce.
While Grummes remains optimistic about gold’s prospects, he cautioned that the market carries risks, particularly as bullish positioning in the futures markets becomes increasingly crowded. Data from the Commodity Futures Trading Commission revealed that gold’s net length is at its highest level since 2020, when the Federal Reserve made an emergency 50-basis point rate cut amid the onset of the COVID-19 pandemic.
“The current positioning in the paper gold market is extremely unhealthy, as professionals appear to be hedging significantly,” Grummes warned. “The latest Commitment of Traders (CoT) report is very negative and clearly bearish. Gold prices would need to drop significantly before this analysis could be viewed as neutral or even counter-cyclically bullish.”
Grummes also noted that gold is entering a traditionally bearish period. Over the past 15 years, September has often seen significant selling pressure on gold.
“The next sensible buying opportunity may not emerge until the end of September, early October, or possibly mid-December,” he advised.
In the short term, Grummes urged investors to monitor gold’s momentum indicators closely.
“In the near term, keep an eye on the stochastic oscillator on the daily chart. If both lines remain above 80 by Friday evening, the super bullish status is likely to continue into the following week and beyond. Conversely, if the oscillator loses this favorable setup, it might suggest that gold has hit a short-term top at around $2,531,” he explained.
Despite potential short-term volatility, Grummes underscored gold’s long-term value as a critical asset in a diversified portfolio.
“Over the long term, gold has consistently proven its role as a store of value and an inflation hedge for millennia, maintaining its worth even as fiat currencies lose purchasing power,” Grummes concluded. “Despite short-term fluctuations, gold remains a reliable indicator of long-term monetary depreciation and is a preferred investment during economic uncertainty and political crises, as it doesn’t rely on the credibility of an issuer, unlike fiat currencies.”
