Gold has exploded higher over the past few months, but how high can gold really go? Not a day goes by, without hearing about “buy gold”. You read about wild claims about $50,000 gold, even $100,000. There are even claims the gold bull market will last 20 years! The challenge as investors is to seek investment opportunities when no one is really paying attention to an asset class. This is where huge opportunities are made because it is no-one’s radar, particularly the general media. Yet the dynamics are starting to build with the optimal risk: reward options for gold. Many have stated that the price of gold bottomed in December 2015. If gold has bottomed in 2015, then what is a reasonable price to expect in this current cycle, and how long would it take to reach those targets?
When looking at gold, or any other area to invest, we at First Macro Capital, are trying to determine
- How long did past cycles last?
- How High did it go?
- Where are we today?
These three things help us from NOT being married to a trade, but be realistic on our expectations and reduce setting unrealistic expectations.
HOW HIGH DID GOLD GO?
On a historical basis, when we look at the price action of gold over its past bull cycles, it gives us an approximate sense as to how high gold will go in this current cycle, and how long one should expect the price action to occur. It also helps to realistically determine reasonable entry levels, by appropriately determining expected multiples to earn on the investment, and at what price you would be comfortable entering, particularly if you are more of a momentum trader, than long-term buy and hold investor.
The price of gold has ranged in price between 5 to 25 times, but really the metric is between 5 to 10 times because during the mid-1970’s the price of gold went through a bear market falling by more than 20%. This is why the 1970s can be broken up in terms of two bull markets, not one that most pay attention to.
HOW LONG WILL IT LAST?
More critical to the professional investor is trying to determine how long this next bull market could last, and where we are today in relation to these past cycles. Past cycles have shown the gold bull cycle has lasted from 800 to 3,200 trading days. Most of the move in price occurred in the second half of the cycle, with the first half of the cycle mostly having sideways trading. This gold bull market is now the second longest gold bull market, but will it beat out the last gold boom?
HOW HIGH CAN GOLD GO?
The gold price hasn’t even gone up by 2X, since the bottom of 2015, with upside in the price ranging from 5 to 9 times. This puts a gold price in the range of $4,000 to $10,000 from the low set in December 2015
- The upside is in the range of 4-10X from the lows set in 2015, and gold has not even doubled yet!
- Taking a cycle approach, gold presents, a proven strategy, to buy, hold, and create wealth over the next 3-5 years.
- Gold equities will provide greater leverage to investors. You can download our checklist on how to find winning mining stocks.
- The time to double is currently following the 1999 bull market as we are still in the first 5-10% of the current gold cycle.
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