Could Gold Be on the Verge of a Bull Run? Examining Some Technicals and Fundamentals

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After a relatively poor performance in 2021, some investors have dismissed gold in 2022. 

After all, with so-called contemporaries like Lucid Group Inc. LCID and NVIDIA Corp. NVDA experiencing rapid gains, who has time for the less-exciting commodities like gold? 

As it turns out, some of the top analysts in the world do. 

Blackstone Inc. BX Vice President and former Morgan Stanley MS Chief Investment Strategist, Bryon Wein, has been putting out a list of predictions since 1986 with spookily high accuracy. This year, he predicts the Standard & Poor 500 Exchange-Traded Fund SPY will run flat, and a new gold bull market will take the commodity to $2,160 per ounce; that price is approximately 20% higher than it is today and approximately $360 per ounce higher than where it last traded.

Reasons for this expected increase begin with the Federal Reserve’s decision to tighten credit faster and execute three interest rate hikes in 2022 amid inflationary pressure. While some believe that rising inflation and gold prices have an inverse relationship, the finding that gold has averaged a 200% appreciation within the last five rate hike cycles may challenge this belief. 

The recovering demand for gold jewelry could provide another catalyst for gold’s supposed upcoming bull run. Despite somehow escaping major headlines, the first three quarters of 2021 saw strong consumer demand for gold jewelry, particularly in emerging markets. Jewelry accounts for up to 50% of global gold demand, which could be a significant catalyst that many have overlooked. 

Another contributing factor to consider is the demand for gold in a time when there are supply chain issues all over the world. Like other products, gold goes through several stages in its supply chain, beginning with mineral exploration and mining of underground reserves.

Last year, miners produced just over 3,000 metric tons of gold. At that rate, the underground reserves of gold would last less than 18 years without new discoveries. Finally, while some might lament gold’s poor performance last year, the two years prior – gold rose 25% and 18% against the U.S. dollar. 

Gold Plays & Technical Analysis?

With 15 total gold mines around North and South America, GoldMining Inc. GLDG is one example of an investment opportunity in the gold mining industry. 

H.C. Wainwright & Co. has placed a price target on GoldMining of $5 to $6.25 Canadian dollars, which implies a 400% potential upside run from its current price. The market’s valuation of the company’s gold resource – which currently sits at $2.6 per ounce – sits below industry standards, hinting at a potential valuation mismatch.

From a technical perspective, gold stocks are bouncing back from their bottom in September. According to Stansberry Research, similar cases have led to 7% gains within six months and a 19% gain over the next year. 

A textbook cup and handle continuation pattern on gold’s weekly chart might provide additional evidence of bullish catalysts for gold, particularly if the stock breaks over $2,000 and holds.  

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.