While everyone is pretty negative on everything right now, in this morning's video I make my best attempt to lay out a very bullish scenario for gold that could play out over the next 12-18 months. I should also add that my worst case scenario for the gold price is a drop down to US$1500. This price level could be reached early next year in the event the economy stays strong, the Fed hikes the Fed Funds Rate to 5.00%, and holds it there for an extended period.
The $1450-$1500 area is long term chart support. Furthermore, a ~30% decline from the all-time high reached in August 2020 would cause the gold mining industry to move into hibernation. Thus taking a lot of higher cost marginal ounces of gold production offline. While gold is mostly driven by investment flows, mining production is an important part of new gold supply available for sale in a declining gold price environment. Most investment gold comes available for sale in rising gold price environments, not declining ones.
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