The recent trajectory of gold, marked by a robust close above $2100, signals the initiation of a new cyclical bull market, carrying substantial implications for the foreseeable future and extending into the 2030s.
A glance at historical cyclical bull moves in gold reveals a pattern: excluding the initial bull cycle, which commenced in earnest in late 1971, each subsequent cycle lasted approximately three years, with minor fluctuations. Notably, the cyclical bulls of the 1970s exhibited greater potency and volatility compared to those of the 2000s.
Gold’s breakout from a notably bullish cup and handle pattern, a development anticipated since 2021, has triggered a measured upside target of $3000 per ounce. Analyzing similar historical breakouts, the market typically progresses from its measured upside target to its logarithmic target within six to 12 months. Gold’s logarithmic target stands at approximately $4000 per ounce, implying a 117% cyclical bull market from the October 2023 low or 146% from the October 2022 low.
However, given the breakout from a 13-year pattern around all-time highs, the ensuing move is anticipated to be more explosive. While not expected to rival the remarkable surges witnessed in the 1970s (464% and 718%), it is projected to surpass the advancements of the 2000s. A 200% gain from the 2022 low would propel gold to nearly $5000, while the same percentage gain from the 2023 low would elevate gold to $5500.
Projections suggest the potential peak for this cyclical bull around the end of 2026, marking four years from the 2022 low or three years from the 2023 low. However, the realization of gold’s full potential hinges on the occurrence of a recession and downturn, coupled with its robust outperformance compared to conventional portfolios like the 60/40 model. Although gold has already demonstrated a breakout against bonds, it is yet to exhibit a similar trend against stocks.
With gold recently experiencing what could be its most significant breakout in half a century, expectations are high for gold stocks, particularly junior gold stocks, to undergo substantial outperformance vis-à-vis gold over the ensuing one to two years.
