Gold prices experienced significant volatility throughout 2023, with fluctuations occurring during the first nine months of the year. However, starting from October lows, gold embarked on a notable rally, ultimately reaching all-time highs.
This rally, which commenced in the fall of 2023, surprised many investors who had anticipated that a stronger dollar resulting from persistent inflation would dampen demand for the precious metal. Consequently, there were concerns that the SPDR Gold Shares exchange-traded fund (GLD), the largest ETF backed by physical gold, would stagnate.
Bruce Kamich, an analyst at TheStreet Pro, stood out for his prescient analysis during this period. On October 10, Kamich informed investors that “The 8-year cycle in gold is making a bottom,” providing a profitable prediction that suggested a turnaround in gold prices.
Kamich’s insights serve as a reminder for gold enthusiasts to pay heed to his expectations regarding the future trajectory of gold prices. His astute analysis offers valuable guidance for investors navigating the volatile gold market.
The Fed presses the pause button on interest rates
The Federal Reserve’s primary objectives include maintaining low levels of both inflation and unemployment through its monetary policy decisions.
In 2022, inflation surged due to the implementation of easy money policies aimed at reducing unemployment during the COVID-19 lockdowns. Additionally, a global supply chain disruption occurred when the Ever Given container ship was grounded in the Suez Canal, exacerbating price increases across various sectors. In response to these inflationary pressures, global central banks adopted their most hawkish policies since the 1980s, with the Federal Reserve notably raising the Fed Funds Rate from essentially zero to 5.25%. This rate hike posed a significant challenge for gold, which is priced in dollars.
The increase in interest rates effectively curbed inflation, leading to a decline in the Consumer Price Index (CPI) from a peak above 9% in June 2022 to approximately 3.2% by February 2024. Consequently, the Federal Reserve faced reduced pressure to further increase rates, resulting in a retreat of the U.S. Dollar and an increase in the price of gold.
While it remains uncertain when inflation will reach the Fed’s 2% target, the progress achieved thus far has prompted the Fed to adopt a more neutral stance. Notably, the Fed’s Summary of Economic Projections in December indicated the possibility of three rate cuts by the end of 2024. This shift suggests a potential easing of monetary policy measures in response to evolving economic conditions.
Gold’s price chart reveals a new target
With over 50 years of experience analyzing commodities like gold using technical analysis, Bruce Kamich’s seasoned perspective has proven invaluable in navigating both bull and bear markets.
Kamich’s astute evaluation of price, volume, and technical indicators, such as momentum, led to his accurate forecast of gold bottoming in October. As gold prices have surged to all-time highs, Kamich recently revisited the charts of the SPDR Gold ETF and remains bullish on its prospects.
In his analysis from March, Kamich highlighted several bullish signals. He noted an increase in daily trading volume, indicating growing interest in gold. The daily On-Balance-Volume (OBV) line has exhibited strength since mid-February and is on track to reach a new high, signifying positive accumulation. Additionally, the Moving Average Convergence Divergence (MACD) oscillator is in a bullish alignment above the zero line, further supporting the bullish outlook.
On-balance volume measures up-minus-down day volume, while MACD serves as a momentum indicator.
The SPDR Gold Shares ETF closed at $203 on March 27, and Kamich believes higher prices could be on the horizon. Using a weekly point-and-figure chart analysis, he calculated a price target of $271 for the ETF.
Moreover, Kamich utilized weekly price data and percentage changes with a five-box reversal filter to derive an even more optimistic price target. This method suggests a price target in the $299 range, with Kamich rounding it up to $300. He notes that round numbers often act as significant levels in trading, serving as magnets for price action.
The U.S. economy could support gold stocks in 2024
The Federal Reserve’s projections indicate a moderate economic growth trajectory for 2024, with gross domestic product (GDP) expected to grow by 2.1%, down from 2.5% in 2023. Concurrently, while unemployment is forecasted to remain relatively low, it is anticipated to increase to 4% from 3.6% in 2023.
This economic slowdown and the uptick in unemployment could present challenges in the upcoming year, particularly amid the uncertainties associated with a presidential election year. In such an environment, gold may emerge as a beneficiary, driven by a weaker dollar and a flight to safety. Historical trends illustrate that during periods of economic turmoil, such as the aftermath of the Great Recession in 2008-2011 and the onset of the COVID-19 pandemic in 2020, gold prices experienced significant appreciation.
Bruce Kamich’s analysis, positing that gold reached its “8-year” low in October, suggests that potential interest rate cuts and heightened investor uncertainty could fuel a rally in gold stocks. Kamich has identified gold mining stocks as top investment ideas for 2024.
Based on his analysis of point-and-figure charts, Kamich sees potential for Harmony Gold (HMY) to rally to $10 and sets a target of $12 for Osisko Gold Royalties (OR). These targets reflect his bullish outlook on the gold mining sector, driven by anticipated market dynamics and technical indicators.