(Kitco News) - Although the gold market is struggling to attract new bullish momentum after its recent run to consecutive record highs, the rally is far from over, according to one market analyst.
In a recent interview with Kitco News, Chantelle Schieven, Head of Research at Capitalight Research, noted that while a slower pace of interest rate cuts could continue to pressure gold in the near term as investors adjust their market expectations, geopolitical uncertainty continues to support the precious metal.
Schieven highlighted that geopolitical turmoil has been a key factor behind gold’s nearly 30% rally this year. She added, however, that the safe-haven premium in gold remains low, as investors are only just beginning to focus on specific hotspots, primarily the escalating conflict in the Middle East, where Israel's attacks against Hezbollah prompted a barrage of ballistic missiles from Iran.
She added that rising geopolitical tensions could easily push gold prices up another 10% as a safe-haven asset.
“In that scenario, $3,000 an ounce is not that far away,” she said. “If we see the conflict in the Middle East escalate, I suspect we would see $3,000 an ounce before the end of the year. But we could also see that 10% bump come back down if tensions de-escalate.”
Looking beyond the near-term volatility, Schieven said gold remains well-supported as long-term factors begin to come into focus. She described gold’s potential as something that can transform the marketplace.
“Some of the factors that we now see impacting the gold market are ones we first started watching and talking about 16 years ago,” she said. “We’ve always seen issues like growing debt as a long-term factor, but at some point, the long-term ends up becoming today’s concern. All of the little things we have seen happen in the last two years are now starting to add up, and that is what has driven gold prices higher.”
Schieven noted that, as impressive as gold’s rally has been this past year, the precious metal is just beginning a new bull cycle.
“We are nowhere near the peak of this gold cycle. We haven’t even reached the euphoria stage where prices can really rally,” she said.
Schieven stated that she remains a long-term bull because it’s difficult to see how the current supportive environment will change. She pointed out that even if Russia’s war with Ukraine ends, there will still be significant mistrust between Western and Eastern nations. This mistrust, she said, will continue to weaken the U.S. dollar as nations develop new trade agreements and diversify away from it.
“The world is shifting away from globalization. The U.S. dollar is not going away, but its role is being diminished, and as nations look for alternatives, they will continue to buy more gold,” she said.
At the same time, Schieven said that rising sovereign debt levels, including in the U.S., are weakening the purchasing power of all fiat currencies. Although the U.S. government will see new leadership next year, Schieven noted that neither presidential candidate has addressed the nation’s debt levels, which have now surpassed $35 trillion, and the government’s deficit will continue to grow regardless of who is in office.
She added that, outside of geopolitical uncertainty, the threat of a global debt crisis is the biggest danger the global economy faces.
“Central banks can't hold rates as high, so there's just more uncertainty about inflation,” she said. “Just this one factor will, in my view, keep gold and silver in a bull market for the next few years.”
While gold could reach $3,000 in a volatile short-term move, Schieven said the price will eventually reach that level in a sustainable bull market as well.
