Is Gold To $2,200 And Beyond Achievable?

Gold is meant to be the go to asset in times of trouble and the cliché of clichés for a rise in gold was “war in the Middle East.”

Those days of clear linkage seem to be over and many put this down simply to crypto. Bitcoin
BTC
is digital gold, or as the joke goes, “gold is Boomer bitcoin.” To me there is no doubt this is the case. Bitcoin has diluted the use case of gold as an asset for dangerous times and this is particularly the case with the idea of flight capital where people who want to flee need an asset that is as light as possible, and bitcoin has no mass at all just like the electrons that created it. However, as for now bitcoin is a private sector asset while gold is a public sector asset.

Some people say gold is obsolete because it’s just a commodity that is no longer used in currency and is therefore not money anymore and just an element good for electronics and bangles and even its usage in dentistry is no longer a big deal. However, that misses the real reason countries have gold reserves. Gold is for war. Gold is the only money when a country’s back is against the wall and it needs to buy things from the rest of the world. Paper is not so welcome, especially if you are on the losing side and/or inflating your currency to fund such a devastating situation.

So gold is not going extinct, especially when we see rising levels of geopolitical instability. Gold is also meant to protect against inflation, but this, too has not seemed to have been a factor. The gold price has not kept up with the price of eggs.

So what now for gold?

Here is the chart:

This is a lovely chart because it is simple. If there is any benefit in technical analysis, this is the perfect chart to use. It says if gold breaks this line it’s going up a fair bit. I tone that phrase down because how much a “fair bit” is a much more tricky call. If it does not then it is going to fall to $1,800 or lower.

I had a recent period of love for gold when inflation was going to rocket and it hugely disappointed, so I reverted to my gold sceptic position, which I still hold. For someone who is not a gold bug the way is to dollar cost average gold, which simply means buy a chunk every so often, once a month, or once a week, or once a quarter etc., whatever works for you, and just stack it. You can do that with an ETF, bullion or even by random purchases of stocks in gold miners. However, most people simply want to know if they should pile in now or not.

To me the answer for speculators is wait for a clear break past the old high. Then it’s worth considering.

So let’s look at another chart:

So this is a route map of a bull run for gold. First it has to make a convincing new high, then it needs to break up out of $2,200 and then it’s got a new ceiling at $2,600.

This is, however, not exactly likely to happen on “bullet time” and it’s good to remember gold is inflationary. “What?” many will exclaim. Gold dilutes every year by its mining. There are 3,000 tonnes mined, which is at least 2% of the total ever mined but if you take out all the gold in use it’s about 10% of the free float. This is bearish if demand doesn’t change much but bullish if there was suddenly a panic. Even so you can see in recent times gold is not susceptible to the sort of verticals normally associated with minor commodities or crypto.

So for the investor, it remains a good time to acquire and for the traders there are clear levels to stalk.

To me the chart looks very strong. With interest rates on the wane and the potential of QE popping up at the tail end of next year or 2025, built in previous inflation and enough wild men in global politics to burn the house down, gold should have enough support even if crypto continues to gnaw away at gold’s use cases.