Expectations of a long bullish cycle for gold Gold prices are writing a new chapter in the history of safe havens... Rising until 2028!
Despite gold prices reaching record highs near $3,500 per ounce, this could be the beginning of a long bullish cycle.
Since 2023, when gold prices hovered around $1,800, global central banks revealed their positions, moving further away from the US dollar in the face of sanctions imposed over Russia's invasion of Ukraine, high US debt levels, and a record dollar, narratives about the future of gold began, with talk of a price that could reach $3,000.
Central bank purchases reached an all-time high of more than 1,100 tons in 2023, according to the World Gold Council. This was coupled with continued inflows into gold exchange-traded funds (ETFs), which supported the rally. At this time, some rushed to buy the yellow metal, but others may have hesitated, and with the price exceeding $3,300, fear buying, also known as FOMO, has begun.
When investing, it's important to remember that "time in the market is more important than market timing." Some investors may hesitate to buy gold after the recent rally, fearing they've missed out. But this could be another costly mistake.
The Only True Safe Haven Left
According to Bloomberg, gold just reached a new milestone, continuing its 30% rise this year and briefly surpassing $3,500 per ounce for the first time. These moves highlight how the narrative of a "US sell-off" is gaining momentum. Banks are gradually becoming more optimistic: Goldman Sachs has forecasted $4,000 an ounce by the middle of next year. Jefferies analysts say gold may be "the only true safe haven asset left."
Bullion prices rose as much as 2.2% on Tuesday, following a 2.9% gain in the previous session. In the near term, these developments undermine Treasury Secretary Besant's recent comments supporting a strong stance toward the dollar.
Gold's rise also raises questions about how much dollar weakness Trump might accept. "Gold's rapid rise this year suggests that market confidence in the US is lower than ever," said Li Liang Li, an analyst at Calanish Index Services. He added, "The 'Trump deal' narrative has evolved into a 'sell-out America' narrative."
The precious metal has seen a sharp rise as confidence in dollar assets has eroded due to Trump's trade war and unpredictable policies. Inflows into bullion-backed exchange-traded funds (ETFs) and central bank buying have fueled this rally, with prices rising monthly this year.
However, the recent rapid rise has strained some technical indicators. Bullion's 14-day relative strength index (RSI)—a measure of the speed and intensity of movements—has surpassed 79, above the 70 level that could signal the rally is about to stall, according to analysts Yihui Shi and Jake Lloyd-Smith.
The dollar and Treasuries, traditional havens in times of stress, have suddenly become less attractive. It wasn't long ago that investors anticipated a so-called Trump deal, which greatly reinforced American exceptionalism, but now it looks more like a sell-out America.
The dollar's correlation with US yields broke after April 2, and the US currency index has deviated from yields. Under Trump's tariffs, this is only part of a broader, potentially painful shift. The role of American households as buyers of last resort for the global economy, and the role of the U.S. military as a cornerstone of security and political alliances, are also being called into question.
Bloomberg estimates that investors have added $18 billion in purchases of gold, ultra-short-term U.S. Treasuries, and low-volatility exchange-traded funds so far in April, shifting their money to safe havens.
For his part, Jörg Kiener, managing director and chief investment officer at Swiss Asia Capital (Singapore), told CNBC that current prices will not reflect any action in U.S. monetary or economic policy. "The bull cycle has just begun, and the short-term price trajectory is not something you can look at," he said. "Gold could reach between $8,000 and $12,000 by 2028."
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