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(Kitco News) Gold has been gearing up for its breakout to $2,500 for the past 12 years, and it must now break the final resistance level to open up its "phenomenal" upside, according to Florian Grummes, Managing Director at Midas Touch Consulting.
"Since 2011, gold has been in some form of consolidation pattern," Grummes said. "All it takes for gold is to break through this $2,070 level ... From $1,920, gold can rally $600 in the next six to eight months easily."
The key question for the market is when gold will breach the $2,070 an ounce, Grummes told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
This could take anywhere between a few months to a year. "But it will catapult gold much higher over the next two to three years," Grummes noted.
From a technical perspective, gold can reach $2,500 an ounce quickly and then advance to $3,500 and $5,000. "This formation has been 12 years in the making … The upside is phenomenal," Grummes said.
On the downside, Grummes does not see gold falling much below $1,800 an ounce, adding that a move to the downside would not be larger than $50 is the most likely outcome.
At the time of writing, August Comex gold futures were trading at $1,914.70, down 0.64% on the day.
To find out why Grummes is projecting a $600 move higher in gold in the next six to eight months, watch the video above.
Pressure from the Fed
Gold's rally stalled in the second quarter of the year as the Federal Reserve turned out to be more hawkish than expected in the face of sticky inflation data. Gold came under pressure after Fed Chair Jerome Powell promised at least two more rate hikes and took rate cuts off the table for this year.
Grummes disagreed with the Fed's stance that more tightening would be needed. "At the end of the third or fourth quarter, the Fed would be forced to pivot … You are going to see more and more problems cracking up in the real economy over the next few months," he said. "And at some point, they will be forced to lower rates again."
To find out why Grummes sees gold as a leading indicator for a Fed pivot, watch the video above.
Grummes also weighed in on the outlook for the U.S. dollar amid what he sees as a crack-up boom happening in the U.S. stock market.
"[Collapse] is the final outcome in any fiat money system … The only question is how long it takes," he said. "It's obvious that we have a break between the East and the West. There is a new cold war already going on, and the BRICS countries are trying to move away from the dollar. Things are accelerating, but it's a process that might take the next ten years."
Watch the video above to find out Grummes' top mining stock picks with significant upside.
