SeekingAlpha’s Andrew Hecht sees four factors currently working in the yellow metal’s favor.
After reaching a yearly high of $1,362 an ounce, SeekingAlpha’s Andrew Hecht says gold prices face two key resistance levels at $1,377 and $1,428. He believes the yellow metal is ready to breach both of them and pass the all-time high of $1,920 an ounce from September 2011.
A recent SeekingAlpha article discuses how gold has been making higher lows and higher highs since bottoming out in late 2015, with Hecht seeing a myriad of factors working in the metal’s favor. Four of them stand out as the most likely catalysts that will allow gold to post a new all-time high in the relative near-term.
The first factor Hecht touches on is the dollar. After reaching the highest level since 2002, the dollar has been falling sharply since the start of 2017 and is now testing multi-year lows. To Hecht, this is part of a long-established pattern dating back to 1985, when the greenback entered a seven-year bear market. After 1992, the dollar went on a nine-year rally before turning bearish again in 2001.
According to Hecht, we are in the closing stages of a nine-year bull market in the dollar that started in 2008, and the greenback might be facing a seven to nine-year bear market. Because of the dollar’s inverse relationship with gold, he says a prolonged bear market would greatly benefit the yellow metal.
The article then discuses the second factor – the world of digital currencies and how it holds a hint at gold’s future. Cryptocurrency markets experienced a selloff after recent comments by JP Morgan Chase Chairman Jamie Dimon, along with efforts from China to ban them. Despite this, interest in alternative means of exchange remains, and Hecht says this will translate to higher gold and silver prices in the future.
Then there’s faith and credit. Currencies around the world could be facing tough times after the faith and credit that backs them runs out. The article states that after the global financial crisis of 2008, governments turned to liquidity to avoid a recession, introducing low and negative interest rates and quantitative easing, the latter of which is still in effect in Europe.
Hecht believes that inflationary pressures which lower the value of currencies are the price to pay for central bank liquidity, and he sees the move to digital currencies as a result of central bank actions. The rise of precious metals, Hecht says, could be the ultimate price of loose monetary policies.
Last on Hecht’s list is the bullish technical picture for gold, which suggests that the rally in the metal is just getting started. Rising price, increasing volume and open interest typically signal a bullish trend, and Hecht finds this to be an optimistic forecast for gold.
The fall of the dollar and its entry into a bear market, the spike in digital currencies and an increase in inflationary pressures, combined with a positive technical picture could guarantee a continuation of the rally in gold. Hecht predicts that the metal could surpass $2,000 an ounce sooner rather than later, and expects silver and platinum to experience significant gains over the same period.