Source: Jin10 Data
Wells Fargo & Co. stated that attempting to predict where this round of gold price rise will end is futile, and the price of gold may reach $3000 in the coming years.
As the gold price hovers near the historical high above $2500 per ounce, an analyst warns investors not to try to predict this market.
John LaForge, head of physical asset strategy at Wells Fargo & Co, recently stated in an interview that the recent breakthrough in gold prices occurred after he raised his year-end target to $2500 per ounce. Gold has risen 23% so far this year and has set historical highs over 20 times.
LaForge pointed out that trying to predict where this rise will end is futile. He added that this surge is simply the market catching up with the bullish trend seen in other industries at the start of the super cycle.
He said, "In the first few years of the gold market, namely 2020 and 2021, gold's performance was disappointing compared to other commodities. Most commodities doubled in value. Gold finally reacted. This surge is significant to me because it confirms that we are in a super cycle for commodities."
Looking ahead, although gold prices have risen over 20% so far this year, the momentum may start to slow down in the final months of the year. However, LaForge stated that he does not expect this trend to reverse quickly.
He said, "Perhaps we will see some retracement, or maybe gold prices will just continue to slowly rise. The current trend is bullish. Although the rise may slow down, I believe that $2500 is just a stopover."
LaForge added that he believes the rise in gold is sustainable, with a key reason being that it is not just against the US dollar. He pointed out that this year, the gold price hit historic highs against all major currencies.
Although it is not a formal target, LaForge suggests that gold could reach $3,000 in the coming years. This level would be significant as it represents the historical inflation-adjusted peak for gold. At the current price, gold is less than 20% away from this target.
As for what is driving the market, LaForge stated that inflation remains a key factor in the gold rally, but he added that market concerns about inflation are shifting. At the start of the supercycle, gold was supported by commodity-driven inflation, as prices of copper and lumber surged due to demand outstripping supply.
While inflation driven by commodities has slightly subsided, LaForge mentioned that investors are now buying gold to hedge against debt-driven inflation.
He said, "Debt continues to grow, and I don't see this changing. The continuously rising debt could actually extend the commodity supercycle beyond an average of over 10 years. I just don't know how this country will repay $35 trillion in debt."
Although LaForge is bullish on gold, he is not as optimistic about silver. He added that silver performs well as it is propelled by the rise in gold, but he expects it will not outperform gold.
LaForge stated that due to the economic slowdown putting pressure on US manufacturing, weak industrial demand will impact silver demand, limiting its price potential. He said:
"I believe we can expect silver to have these short bursts of momentum, but overall, gold is the metal worth watching."
Editor / jayden