The momentum in the gold market has swung decisively back in a positive direction over the last several weeks. Gold prices fell below $1,240 per ounce in early December before rebounding in earnest. Through the first few days of 2018, gold prices have flirted with the $1,320/oz level.
This is interesting given that over the past several years gold has tended to exhibit seasonal weakness toward the end of the year. The fact that the Federal Reserve raised interest rates each of the last three Decembers also plays a role in that trend. Yet in the past month, gold has advanced an impressive 4.5%.
However, even before the recent surge pushed gold back above the key $1,300 level, a prominent commodities trader told the financial news site TheStreet that he anticipated gold to rally back to $1,700 per ounce (“or higher”) by the end of this year. This bold call was made about a month ago, when the yellow metal was still stuck trading near $1,250/oz.
Could the gold price really sustain such a dramatic rally this year? It’s honestly an overly optimistic prediction given that gold last traded above $1,700/oz in late 2012—more than five years ago. Still, the gold market logged a similar performance following the financial crisis, albeit in a much more volatile fashion. The market may be due for this kind of volatility after years of stagnation and basically sideways trading patterns.
As an isolated example of when gold was more volatile, the gold price ended January 2011 very close to where it stands now, right around $1,320/oz. By the end of summer, it had touched as high as $1,900/oz, which is still the nominal all-time high price for the metal. High volatility cuts both ways, however: By year’s end, gold had fallen all the way back down to about $1,520/oz.
Gold is currently benefiting from some technical tailwinds as it establishes new support above the $1,300 mark. If you’re betting on a major disruption to the global economy or to the world’s financial system in 2018, the upside potential for the precious metals is certainly worth considering.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.