Gold bull market still ‘mid-cycle,’ could reach $6,750 by U.S. Midterms: MKS PAMP
NEW YORK (February 25) Gold prices have pushed back to $5,200 an ounce but still remain well below January’s all-time highs near $5,600 an ounce. While some investors are starting to question gold’s long-term momentum during this consolidation period, one market analyst said that, by historical standards, the current bull market is still fairly young.
In her latest precious metals report, Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, looked at the five gold bull markets of the last 50 years. Given the current momentum, she said that gold and silver prices have room to move higher this year. She noted that this current cycle is 39 months old, with gold up more than 200%, silver up around 350%, and the U.S. dollar down 13%.
“By historical standards, that's a mid-cycle performance profile. If Gold had to mirror average cycle duration and performance, that implies $6750 by October / US midterm elections,” she said.
While precious metals are supported by traditional fundamental factors like falling interest rates, geopolitical instability, economic uncertainty, and dollar weakness, Shiels said there are also other bullish factors that make this cycle different.
Shiels explained that the current macro backdrop is defined by several major structural shifts. Global fiscal fragility is far greater than in past cycles, with elevated debt and persistent deficits reinforcing what many describe as “fiscal dominance.”
At the same time, the U.S. is experiencing much deeper political polarization, global wealth inequality has widened, and China has become a far larger economic force than past U.S. adversaries such as the Soviets in the 1970s and 1980s. She explained that in this environment, gold has increasingly broken its traditional correlation with real rates and evolved into a broader “hedge to the system.”
Meanwhile, supporting investment demand, Shiels said that central banks remain “core anchors,” as their net monthly purchases effectively backstop higher floor prices.
“The EM CB catch-up scale remains massive: The top 20 EM holders own ~7,500 tonnes of Gold, where convergence with DM CB averages (G10 average) requires 22,000 tonnes (or 6 years of annual primary supply),” she said.
At the same time, Shiels also pointed out that the retail market has become more diversified, with robust physical demand highlighted by Costco gold sales and rising interest in gold-backed tokens on digital exchanges. She said that fractional ownership means a far broader pool of capital can now participate.
Finally, Shiels said that gold remains underinvested by institutional investors.
Looking ahead, Shiels said that further U.S. dollar weakness could ignite higher prices.
“The dollar decline is the mildest we've seen (only -13%), so there is room for further USD weakness if catalysts emerge,” she said.
At the same time, Shiels said that gold could continue to outperform silver.
“Silver's pace is also more like the 2008-2011 cycle (+360% in 33 months), implying that cycle duration and pace this time imply Silver is nearer the end,” she said.
As for factors that could derail gold’s run, Shiels said that an improvement in geopolitical conditions, sustained strength in the U.S. dollar, and a political shift in U.S. fiscal policy all pose headwinds for the yellow metal.
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