Gold price crash: The have eased significantly from their all-time high levels. They have not only erased all the gains amassed in the ongoing calendar year, but also entered the bear territory. However, this cooling off in prices could set the stage for gold to cross above the $11,000 mark, predicts , Chief Economist & Global Strategist at Europac.
His optimism stems from the trend last seen during the 2008 global financial crisis (GFC), when the bullion, like this time, melted and acted against its nature of safe-haven edge amid geopolitical and macroeconomic crisis.
US spot gold prices hit a low of $4,098.87 in the last trading session on Monday, March 23, spooked by inflation fears amid rising crude oil prices due to the Middle East conflict. From the .
Higher inflation could put the ‘s rate cut trajectory on hold for longer, which does not bode well for non-interest-yielding assets like gold. Additionally, the US dollar has also risen amid the US-Iran war, which again acts against gold’s interests.
Past trend signals strong upmove for gold
While the current slump in gold prices comes as a setback for bullion investors, Schiff highlights a similar trend observed during 2008 GFC, when prices crashed 32%, erasing about 40% of the bull market gains.
However, after gold bottomed out, it rallied 178% in the next three years. Schiff says once again, the gold price crash has erased about 40% of the gains seen since its rise from $2,000. Assuming the markets tend to move in cycles, Schiff predicts that a 178% surge from the current low puts gold price target at $11,400 in the next three years.
He further, in a separate tweet, stated that the war should be a case for turning more bullish on the gold prices.
“The war means soaring U.S. budget deficits, skyrocketing food & energy prices, recession, rising unemployment, collapsing stock, bond, & real estate prices, increased terrorism, and a financial crisis,” Schiff stated as these factors could fuel safe haven demand.
Analysts also believe that the long-term outlook for gold prices remains decisively positive, driven by structural themes such as de-dollarisation and de-globalisation. These are multi-year shifts that are gradually reshaping the global financial system.
“As this transition unfolds, are likely to increasingly capture a portion of the reserve currency premium historically enjoyed by the dollar. This process, while gradual, is powerful and supportive of a sustained bull market in bullion over the next 4–5 years,” Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities told Mint.
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