Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Four Scenarios for Gold

IMG Auteur
Published : June 08th, 2017
690 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Market Analysis

The latest edition of the In Gold We Trust report lists four scenarios for gold. What are they?

On Monday, we provided a short summary of the annual “In Gold We Trust” report. However, we did not manage to cover the whole 169-page publication. Hence, today we would like to address the four scenarios for gold mentioned by the authors of the publication. These alternatives are as follows:

  • Scenario A: “Relatively strong real economic growth”. The U.S. economy begins to grow strongly, while inflation remains in an acceptable range. The gold price should trade in a range from $700 to $1,000.
  • Scenario B: “Muddling through continues”. Real U.S. GDP growth and consumer price inflation remain in a range of 1-3 percent. The gold price should remain in a range from $1,000 to $1,400 in this scenario.
  • Scenario C: “High inflationary growth”. The U.S. economic growth accelerates significantly (due to the implementation of Trump’s fiscal stimulus), but so does inflation. In this scenario, the price of gold should trade in a range from around $1,400 to $2,300.
  • Scenario D: There is either a recession, or stagflation. The significant weakness in the U.S. dollar sends the price of gold soaring. Gold prices between $1,800 up to $5,000 appear possible in this scenario.

What is striking in these scenarios is a huge price range. We know that making predictions is very difficult (especially about future), but saying that gold prices should trade somewhere between $1,400 and $2,300 (it’s a range of $900) is not very useful. You see, we may similarly say that gold will trade this year in a range between $0 and $10,000, but it will not make us a great forecaster.

Another controversial issue is the assumption that high inflationary growth would be necessarily positive for the yellow metal. It’s true that gold is a hedge against high and accelerating inflation, but a lot depends on the level of real interest rates. If real economic growth speeds up, gold may not shine.

Which scenario is the most probable? Well, investors expect more of the same, at least when it comes to inflation. As one can see in the chart below, the break-even inflation rate (which represents a measure of expected inflation derived from 5-Year Treasuries with Constant Maturity Securities and 5-Year Treasuries indexed by inflation) have been trading sideways over the last few years.

Chart 1: 5-year break-even inflation rate over the last ten years.

24hGold - Four Scenarios for G...

Therefore, we should neither expect the price of gold to be at $700 (!) nor $5,000 (!!) in the near future. Gold prices should remain in a range of $1,100 and $1,300 for a while. Today’s events may be a breakthrough. When geopolitical threats vanish, the price of gold may go south, especially that there are more upside risks on the macroeconomic front. On the other hand, new Comey’s revelations or May’s defeat in the U.K. could send gold prices up. Stay tuned!

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Gold News Monitor
Gold Trading Alerts
Gold Market Overview

Did you enjoy the article? Share it with the others!

Data and Statistics for these countries : Georgia | All
Gold and Silver Prices for these countries : Georgia | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
WebsiteSubscribe to his services
Comment this article
>Follow all commentairies
You must be logged in to comment an article8000 characters max.
Log in or Sign up
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Leaked Police Report: There Are 23 Muslim-Controlled “No Go Zones” ...
25 Junkevthorne1
I do not know how anyone could take an article like this seriously. It is garbage of the worst kind. 'Anonymous sources' 'unidentified leaks' - not...
Bitcoin in Perspective: Bill Gates Worth More, Gold 200 Times More
22 JunDavid C.2
Yes Mish, but bitcoin and the wealth and debt burdens of the world are fully backed by electrons which are very light. Unlike that 68 ft glob of m...
Bitcoin in Perspective: Bill Gates Worth More, Gold 200 Times More
23 JunDynoman0
Valuable potential is what's currently offered by digital currencies. It makes absolute sense to have a global digital economy based upon borderles...
Absent Without Leave
21 JunS W.
Bail ins for sure. It was agreed at the G20 in Brisbane. You are not really a share holder. You are an unsecured creditor to the bank a...
Absent Without Leave
19 JunJ.3
Perhaps all the international shenanigans are the smoke and mirrors intended to obfuscate the view of the looming financial catastrophe. When the ...
Gold Price Cuts Post-UK Election Loss, ETF Investors Sell, Nasdaq D...
16 JunSam Maher
"the SPDR Gold Trust (NYSEArca:GLD) – saw its sharpest liquidation since March in the week-ending Thursday, with shareholders cutting the fund's si...
Things To Come
13 Junkevthorne3
If voting for 'parties' actually made a difference they would have not legalised it. Since 1914, it's been the supply of currency that has governed...
Things To Come
12 Jun Roygbiv0
And JHK ruined your life because he then voted for Obamba ? For Jim C.
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS