While gold has been unable to structurally print new all-time highs, the conditions are right for gold to move higher into ATH territory.
Gold has stood the test of time as a reliable measure of prices and a symbol of stability during times of economic uncertainty. In the face of rising prices across all sectors, it comes as no surprise that the price of gold is also following suit.
While gold may not have surged significantly in relative terms due to the disinflationary monetary policies of central banks, it is only a matter of time before it catches up and sets new all-time highs. The long term gold price chart (gold in USD) has a setup that confirms gold’s intention to move higher. Moreover, when expressed in leading world currencies other than the USD, it is clear that gold is already in the process of setting new all-time highs.
Is gold expected to move higher, set new ATH?
This article explores the factors behind gold’s objective measure of prices and its potential to soar in leading world currencies, ultimately answering the questions “is gold expected to move higher” as well as “is gold set to reach new all-time highs.”
We take an objective and data-driven approach in this article. We try to avoid, at all costs, bias and preferences. Although we have a lot of confidence in our recent gold forecast, we prefer to take a different approach to answer the aforementioned questions. That’s why we cover the following points in order to answer the aforementioned questions:
- 1. Why Invest in Gold When Rates Are Rising
- 2. Gold as an Objective Measure of Prices
- 3. The Disinflationary Effect on Gold
- 4. Gold Price Chart Analysis
- 5. Gold in Leading Currencies
- 6. Is Gold Expected To Move Higher?
- 7. Is Gold Set To Move To New All-Time Highs
Why invest in gold when rates are rising
With interest rates reaching levels not seen since 2001, investors face tough decisions on where to allocate their funds. Although assets like bonds may offer attractive yields in a rising rate environment, gold remains a preferred choice due to its ability to preserve value during inflationary times and instill confidence during economic uncertainties. The price of gold often reflects market sentiment, acting as an inflation hedge and/or a safe haven in times of crisis.
Note that our point is that gold can be rising either as a reaction to inflationary pressures, or in times of crisis, or both. The latter does not occur often. We try to point out the dominant dynamics influencing the gold price.
Gold as an objective measure of prices
Amidst soaring inflation rates and skyrocketing prices, gold stands as a steadfast benchmark of real value. As all prices move higher, the price of gold inevitably follows, albeit with a slight lag. We attribute this lag to the disinflationary monetary policies implemented by central banks worldwide. Yet, despite this lag, gold’s reliability as a measure of prices remains unparalleled, making it an essential asset for investors seeking an objective anchor in turbulent economic times. As other investments may experience temporary surges or corrections, gold provides a consistent gauge of true value and purchasing power.
The disinflationary effect on gold
Disinflationary monetary policies pursued by central banks are the root cause of the relative lack of a significant price surge in gold compared to other assets. As these policies aim to stabilize or reduce the general price levels of goods and services, they can impact the immediate upward trajectory of gold. However, it is essential to recognize that these disinflationary policies are temporary and are not reflective of gold’s long-term value.
Eventually, as the inflationary pressures build and the impact of central bank policies diminishes, gold will surge and make up for the relative lag experienced during the disinflationary phase.
Moreover, as evidenced by the latest FOMC meeting, the pace at which the Fed is offloading Treasuries might decelerate in the not too distant future: Fed plans ‘in-depth’ talks on balance sheet run-off in March of 2024;
Gold price chart: secular view
The gold price chart over the past 50 years presents an intriguing pattern known as a “cup and handle” reversal, which bodes well for gold’s future prospects. The “cup and handle” pattern is a bullish continuation pattern often seen in technical analysis. It typically indicates a brief pause in a rising trend before the price resumes its upward trajectory. In this context, the “cup” portion of the pattern represents the gradual decline in the gold price, forming a rounded bottom. Conversely, the “handle” is a minor retracement that follows the cup formation.
The chart showcases this pattern, signaling a potential bullish breakout in gold prices. The cup formation, spanning over several decades, indicates a prolonged accumulation phase, during which investors have gradually built positions in gold. As the cup formation concludes, the handle portion serves as a consolidation before the next upward move.
Within the handle portion, we observe a recent rally that brought the gold price close to testing its previous all-time high, further validating the pattern’s potential for continuation. The presence of higher lows within the handle reaffirms the market’s strength and suggests an eventual breakout towards new highs.
Gold price chart: long term view
The long term gold price chart, for which we use the weekly timeframe of spot gold, gives more detail.
Clearly, the series of reversals since summer of 2020, that make up the consolidation, has a very bullish looking.
The long term moving average on the weekly gold price chart is rising, price is well above this moving average.
The combination of the “cup and handle” reversal pattern and the intact long-term channel paints a promising picture for gold’s price trajectory. Gold price chart analysis points towards a bullish breakout in the near future, with the potential for gold to set new all-time highs. However, as with any market analysis, there are risks and uncertainties to consider, and it is essential to remain vigilant and keep abreast of market developments.
Note, though, that the above charts show the price of gold in USD. Just these gold price charts, in and on themselves, suggest with a high level of confidence that gold wants to move higher and set new all-time highs.
It will get even more interesting, as we will see in the next sections, when considering gold denominated in currencies other than the US Dollar. It is important to emphasize that gold has already made new all-time highs in several leading world currencies.
Gold in leading currencies
Investors primarily measure the price of gold in USD terms. The price of gold expressed in other leading world currencies, such as the Japanese Yen and Australian Dollar, emphasizes gold’s value.
That’s why it is misleading, to some degree, to only focus on the gold market when looking at the gold price chart denominated in the US Dollar.
Over the last 12 months, these currencies have shown a pronounced upward trend when paired with gold. This demonstrates the strength of gold as an objective measure of prices in different regions, offering investors protection and stability in relative terms.
The most pronounced view is how gold performed over the last 4 years, when denominated in 9 leading world currencies. All of these charts feature a strong uptrend, either in the form of a continued uptrend (gold in Japanese Yen, gold in Indian Rupee, gold in British Pound) or in the form of a W-reversal in the form of a rounded reversal which is a very powerful chart pattern (gold in Chinese Renminbi, gold in Swiss Franc, gold in South African Rand).
We now look at the 4-year gold price charts denominated in 20 leading world currencies. Visibly, gold wants to move higher as evidenced by the bullish patterns on those gold charts.
Furthermore, examining the past decade, from 2012 to 2023, reveals that gold has shown significant gains against all leading world currencies, emphasizing its enduring appeal and status as a reliable store of value.
Is gold expected to move higher?
As the era of monetary tightening approaches its conclusion, the spotlight is on the trajectory of gold prices, and the indications are increasingly optimistic. Over the past decade, the value of gold has soared across various global currencies, showcasing its resilience and allure as a preferred investment choice. Moreover, the gold price rise is not only happening on the secular timeframe. Gold is performing remarkably bullish in the last 12 months.
Is gold set to move to new all-time highs
Indeed, gold is ready to move to new all-time highs. The lags experienced in relative terms are merely temporary, and as inflationary pressures continue to build, gold’s value will undoubtedly surge. The objective measure of prices that gold represents, coupled with its potential in leading world currencies, solidify its position as a valuable asset in any well-diversified investment portfolio.
Gold’s enduring appeal as an objective measure of prices is undeniable. While it may have experienced a relative lag in the face of disinflationary policies, its long-term trajectory points towards new all-time highs. Inflationary pressures have risen a lot, interest rates have risen a lot, still gold has shown resilience. That’s because of gold’s objective measure of prices.
In leading currencies, such as the Japanese Yen and Australian Dollar, gold’s strength is evident, reaffirming its status as a universal store of value. With the potential for central banks to adopt more inflationary policies, gold is indeed expected to move higher and SET to reach new all-time highs, making it an attractive investment option for those seeking stability in uncertain times.
