Gold Rally Will Fade, and Prices Could Drop to Lowest Level in Almost Two years

However, John LaForge of the Wells Fargo Investment Institute believes the rally will trip up investors in a matter of months — if not weeks.

Gold’s surge to July highs is creating a bright spot in the market as U.S. stocks struggle. “If stocks get legs, gold will take a backseat like it typically does,” the firm’s head of hard asset strategy said Tuesday.”

Read More : Central Banks to Increase Gold Buying for First Time Since 2013

Yet, he’s not outright discouraging investors from playing the bounce.

“You probably have about a $100 of upside from here,” he said. “Unfortunately, you probably have $100 of downside, too.”

That would take the precious metal to its lowest level in almost two years.

Gold climbed about 1 percent on Tuesday to close at $1233.20 an ounce. It is now up more than 3 percent over the past two months, but off about 6 percent this year.

“We still have way too much supply even at $1,200 for gold,” he said. “The longer term outlook for gold is a little bit more of a sideways trade.”

According to LaForge, gold is in a “bear supercycle.”

LaForge estimates the bearish period will last another three to five years. He sees choppy trading dominating the environment, with prices predominantly in the $1,050 to $1,350 range.

“What that means is we had a period from 2001 to 2011 where gold went from $250 an ounce all the way to almost $2,000,” he said. “It brought out all kinds of supply. We had everyone and their mother out looking for gold in the world, and they found it. So, the price of gold has been sinking ever since.” – Neal Bhai Reports

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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