Analyzing the Gold Market Trends
In a video released on September 23, analyst Benjamin Cowen shared his thoughts on the current trajectory of the gold market. Cowen began by acknowledging that his last video on gold was roughly a year ago, when gold was priced at around $2,000 per ounce. At that time, Cowen predicted that gold would follow a pattern similar to its behavior in 2019, breaking through a key resistance level and subsequently rallying. Cowen noted that this breakout indeed occurred, and gold has since risen approximately 27%, exceeding his original price target of $2,500 per ounce. Reflecting on this rally, Cowen expressed his pleasant surprise at how quickly gold achieved these gains.
While many crypto investors may not see gold as a lucrative investment, Cowen emphasized that it serves as a crucial signal for broader market trends. He explained that gold’s behavior in March 2024 provided an early indicator that Bitcoin might experience a mid-cycle top, leading to a downward trend for the following six months. Investors could have used this as a key signal to anticipate the cooling of the crypto markets despite the prevailing bullish sentiment at the time.
Understanding Gold’s Role in Portfolios
Though gold has underperformed the S&P 500 over long periods, Cowen pointed out that there are times when gold plays a critical role in portfolios. He highlighted the 2001-2011 bull market, where gold appreciated by 600%, while the S&P 500 remained relatively flat due to the dot-com crash and the financial crisis. Cowen reiterated that gold can act as a hedge against broader market downturns, especially during periods when traditional equity markets stagnate or decline.
Exploring Technical Indicators for Gold
Cowen also discussed the concept of the bull market support band for gold, a key technical indicator he uses to assess long-term trends. Unlike Bitcoin, which uses weekly moving averages, gold’s support band relies on monthly moving averages (the 20-month SMA and the 21-month EMA). Cowen highlighted that throughout gold’s decade-long bull market, it consistently found support at these levels, except during the financial crisis, when it experienced a significant drop. This technical support has continued in gold’s current bull market, with Cowen noting that the metal has remained above its support band since 2019.
Predictions and Insights into the Future of Gold
Looking ahead, Cowen speculated that gold could experience occasional pullbacks, but he does not view these as reasons to exit positions. Instead, he views them as potential opportunities for those seeking gold exposure. Cowen added that gold bull markets are different from crypto bull markets in that they can last for a decade or more. He pointed out that while gold’s price movements are slower, they can be more sustainable over time, making it an attractive asset for long-term investors.
Cowen went on to predict that if gold continues to follow its historical trends, it could reach $3,160 by the end of 2024 and potentially $3,500 by the end of 2025. He acknowledged that while these numbers may seem ambitious, gold’s history shows that once it gains momentum, it can rally for extended periods. However, Cowen cautioned that investors should be prepared for potential corrections along the way, as seen in previous gold bull markets.
Comparing Gold and Crypto Markets
Addressing the differences between gold and crypto, Cowen explained that gold’s daily movements are often much smaller than those seen in cryptocurrencies like Bitcoin. A 0.5% increase in gold would be considered a strong day, while in the crypto space, such a move might be perceived as insignificant. This difference reflects the diverse types of investors attracted to each asset class, with gold appealing more to those seeking stability and wealth preservation over time.
Final Thoughts on Gold as an Asset
In conclusion, Cowen reiterated that while gold may not be as exciting or volatile as crypto, it remains a valuable asset for those looking to hedge against equity market downturns. He emphasized that gold’s role in a diversified portfolio is not to compete with the S&P 500 or Bitcoin over the long term but to provide stability during times of market turbulence. For investors seeking to hedge against a potential S&P 500 selloff, Cowen suggested that gold could serve as an effective tool alongside other traditional safe-haven assets like bonds and fixed income.
