Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Target is $3,000 and Silver is $75 per Ounce

Commodities / Gold and Silver 2016 Apr 25, 2016 - 07:10 PM GMT

By: Jason_Hamlin

Commodities

Precious metals have posted their best quarter in nearly 30 years and mining stocks are soaring from oversold multi-year lows. Those that were willing to buy when everyone else was selling have been handsomely rewarded in 2016. But we believe the gains are just getting started.

After such a huge move to start the year, many have been anticipating a sharp pullback  for gold and silver on profit taking. This would make sense, especially considering the record short positions by commercial traders. Plus, nothing goes straight up, not even deeply oversold assets awakening from a 4-year correction. It is almost always a roller coaster ride.


Yet, gold and silver are refusing to give back any significant amount of their recent gains.

The first mini-pullback occurred during early February, when gold fell from $1,250 to $1,200. But this 4% decline lasted less than a week and gold proceeded to climb to a new high of $1,272 on March 10th.

The second mini-pullback brought gold down from its 2016 high of $1,272 to around $1,215. This 4.4% decline lasted roughly 3 weeks, but gold once again bounced back above $1,250 on April 11th.

Most recently, we’ve had a 3-day pullback to $1,227. This was followed by another spike above $1,250 and a subsequent pullback to a higher low of $1,232 on Friday. But today, gold is once again pushing higher and looks poised to reclaim $1,250 once again.

There seems to be no major momentum to the downside, as we’ve become accustomed to over the past several years. Most of the weak hands have been shaken out of the market and primarily strong hands remain.

Where are all of the Sellers?

We already know that central banks aren’t selling, as they continue to accumulate gold at a record pace (especially in the East). We also know that investors are not selling, as investment demand has increased sharply (especially for silver). Hedge funds have also been piling into precious metals, chasing value on signals that the bottom is in.

And perhaps Deutsche Bank is no longer piling on paper short contracts to exacerbate the downswings in precious metals after getting caught manipulating prices. With the spotlight on big bank manipulation of gold and silver, lawsuits springing up and rumors that Deutsche Bank will be ratting out their co-cospirators at other banks as part of their settlement, maybe (just maybe) we are seeing price discovery function as intended in the free markets.

If the price manipulation via the COMEX does resume in full force, it will be interesting to see how much prices diverge versus the new price fix on the Shanghai Gold Exchange. The arbitrage opportunities could wreak havoc and the CRIMEX may have to resort to cash-only settlements or finally default.

Whatever happens to these fraudsters in the long run, I expect a short-term boost to the gold price following the FED meeting on Wednesday. The likelihood of the Federal Reserve announcing another rate hike is slim to none and the sinking realization that the FED can’t raise rates will continue to bolster gold and silver. The chance of an April rate hike is currently priced in at 2%, while a June hike has a 17% probability.

Hesitant gold investors, still licking their wounds from the past few years, have been cautious to jump back into the water. Too many of them have completely missed a rally of historic proportions this year. The water is warm, yet they are waiting for a big correction and lower price. But the problem is that a big correction hasn’t materialized. We continue to see only mini-pullbacks and the buying opportunities evaporate quickly. This doesn’t mean that a bigger correction can’t happen, but let’s look closer at the upside potential and downside risk from current levels.

Price Targets of $3,000 Gold and $75 Silver to Match Previous Advances

If gold did indeed bottom around $1,050, this new bull market trend is only getting started. The rally that followed the 2001 low generated returns of around 295% for gold. It advanced roughly 4X from $255 in March of 2001 to over $1,000 in March of 2008!

The rally that followed the 2008 financial crisis generated returns of 132% for gold in under three years. The gold price more than doubled from the low of $681 in October of 2008 to a high around $1,577 in April of 2011.

So, while the 20% move higher toward $1,300 has been exciting, gold would still need to climb to somewhere around $3,000 per ounce ($1,050 bottom x 3) to match the gains that gold experienced after bouncing from its prior bottoms.

Silver is holding around the $17 level, up 23% so far in 2016. The rally that followed the 2001 low generated returns of around 433% for silver. It advanced roughly 5.3X from $4 in March of 2001 to over $21 in March of 2008!

The rally that followed the 2008 financial crisis generated returns of roughly 500% for silver in under three years! The silver price went up 6X from the low of $8.40 in October of 2008 to a high of nearly $50 in April of 2011. Could we see another run of this magnitude in the years ahead?

If you thought the $3,000 price target for gold was exciting, consider the following. If the current bull move in silver matches these previous uplegs, silver would need to climb towards $75 per ounce ($13.60 bottom x 5.5).

Of course, there are no guarantees that the current bull move from multi-year lows will match those of the past. But it helps to put some context around the current move and the upside potential ahead.

Investors kicking themselves for not buying near the lows have certainly not missed the train. We are only in the early innings of this ball game. Investors might want to consider edging into new positions now and getting some skin the game. They can then add via buying in tranches over the next few months and lower their average cost if prices do drop.

I estimate that gold has upside potential of around 120% from current levels and downside risk of only around 30%. I project silver’s upside potential at around 440%, with downside risk of 40%. The risk/reward set up is extremely favorable to the long side.

Owning quality mining stocks increases your leverage and potential returns. So far in 2016, mining stocks have been offering leverage of around 4X the gains in the underlying metals. Many of the mining stocks that we track are up 100% to 200% in 2016 alone! Of course, it is very important to do your homework and pick only best-in-breed mining companies with management that you can trust.

If you would like to get our stock picks, model portfolio, trade alerts and monthly newsletter, click the button below for instant access. It is priced right at less than $1 per day!

You can sign up to receive our monthly Contrarian Gold Report, view the portfolio and get our weekly trade alerts for less than $1 per day.  Click here to get started now!

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. Click here for instant access!

Copyright © 2016 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in