U.S. economy may be in late stage of expansion. Gold may rise to 6,000 U.S. dollars
The U.S. economy may be in late stage of expansion, gold may rise to 6000 U.S. dollars
After the Fed announces an interest rate increase, one of the preconditions for determining the direction of future market transactions is to determine what kind of market cycle the United States is currently in.
Two factors that determine the typical market cycle are bond and commodity prices. When commodities are rising and bonds are declining, the market is considered to be in the middle and late stages of expansion. Traders should consider grasping the later opportunities of the bullish trend. When commodities fall and bonds go higher, the market is in the middle and late stages of recession.
From this simple model, it can be seen that the top of the market usually occurs after changes in the prices of commodities and bonds.
From the commodity global price index, prices have been declining for many years since the end of 2014, and fell to the lowest level since 2004-05 shortly before the US presidential election in 2016. This means that commodity prices may rise sharply in the future. In fact, Commodity prices have started to climb, and rising commodity prices are one of the main signals of late-stage expansion.
It is worth noting that the rise in the precious metals market is usually used to confirm the end of economic expansion, because the market's concerns about the economic peak and the subsequent correction increase. The rise of precious metals in this round may be extremely high. Taking the 2009 market crash as an example, the producer price index of metals and metal products rose from 78 to 435 in 7 years, an increase of 557%.
If this scenario repeats itself, what will happen to gold? If gold rises by 250%, it will rise to 3331.25; 350% increase means gold rises to 4663.35; if it rises 450%, then gold will rise to 5,996.25. In other words, gold may rise to 6000! Of course, this will depend on the fear of the top of the new market and the global market.
In summary, due to the bottoming out of commodity prices, the current economic cycle may be the latter part of the expansion. Looking at the historical trend, the precious metals will rise sharply in the end of expansion, and gold may even rise to 6,000 US dollars.