Gold Price Forecast: 6 Catalysts Set to Trigger Seismic Gains

With six catalysts driving the gold price forecast, the yellow metal should easily eclipse its all-time high of $1,895 within the next few years.

That's a 53% gain from the current gold price of $1,236 an ounce.

While one or two strong catalysts can be enough to drive an investment higher, multiple catalysts increase the likelihood of truly monster gains.

"The more catalysts you have, the bigger bang for the buck," said Money Morning Executive Editor William Patalon, III.

Patalon, who writes often about gold investing in his Private Briefing newsletter, says we're witnessing an unusual confluence of no fewer than six gold price catalysts right now.

Gold Price Forecast Catalyst No. 1: Global Threats Increasing

While global turmoil never recedes completely, threats to world peace have been on the rise lately. Conflict breeds uncertainty in the markets, which historically has pushed gold prices higher.

gold price forecastRussia, under President Vladimir Putin, has shown a willingness to challenge the world's democracies any way it can, from its annexation of the Crimean peninsula in 2014 to its alliance with Syrian President Bashar al-Assad to its attempts to influence last year's U.S. elections.

Both North Korea and Iran have threatened the United States outright. China has become increasingly belligerent in regard to its territorial claims in the South China Sea.

Each of these flashpoints now has the added uncertainty of President Donald Trump, who in his first two weeks in office has managed to touch off numerous diplomatic firestorms.

Gold Price Forecast Catalyst No. 2: Stock Markets Losing Appeal

With the U.S. stock markets hovering near all-time highs, investors will be reluctant to keep shoveling more money there. Foreign markets are even less inviting.

Emerging markets remain at risk to a strong U.S. dollar. European stocks face uncertainty from Brexit as well as lingering concerns about the multination debt crisis, especially in Greece. Corrupt governments and a lingering recession plague the major Latin American economies. The economy in China is slowing, and the yuan continues to weaken.

Getting respectable returns from stocks will be tough for the foreseeable future.

And things look worse for the bond market...

Gold Price Forecast Catalyst No. 3: Watch for Rising Bond Prices

Nearly 10 years of low interest rates made bonds attractive, particularly for investors seeking to minimize risk. But now bond yields are starting to rise again, which means prices are falling.

This epic shift was most obvious in the wake of Donald Trump's presidential election victory. In the two days following the election, the global bond market surrendered more than $1 trillion.

Related: The Money Morning Essential Guide to Buying Gold & Silver

A sustained period of rising interest rates will make owning bonds a losing proposition.

"Bonds will be a bad place to be," Patalon said.

When it becomes clear the safe haven bonds have provided for the past decade is no more, investors will look to gold.

Gold Price Forecast Catalyst No. 4: Rising Inflation

Inflation hasn't been a concern in the United States since just before the 2008 financial crisis. In fact, the U.S. Federal Reserve has spent most of the past decade worried that inflation is too low.

But that's changing now. And inflation by definition will cause gold prices to rise.

Inflation rises as the economy begins to prosper. Kiplinger's latest forecasts for the U.S. economy have annual growth stabilizing at about 2% this year then rising to 2.5% to 3% in 2018 and 2019 - better than it's been since before the Great Recession.

And President Trump's economic policies will feed this trend. His proposal for up to $1 trillion in infrastructure spending will help stimulate the U.S. economy - and ignite inflation.

Of course, as inflation rises, the U.S. Federal Reserve will be compelled to raise interest rates.

Most people assume higher rates depress gold prices. But a deeper look proves otherwise...

Gold Price Forecast Catalyst No. 5: The Fed Hikes Rates

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It's clear that gold prices invariably fall in anticipation of, or immediately after, a Fed rate hike.

What many investors don't realize is that in the weeks following a Fed rate hike, gold prices consistently rally.

"It seems counterintuitive, I know," Patalon said. "But it's backed up by plenty of research."

It's happened in 1986, 1994, 1999 and, most recently, in 2004.

The Federal Reserve raised interest rates four times in six months in 2004. Gold prices dipped ahead of the rate hikes. But once the hikes started, the price of gold rose from $375 in May to $453 in November - an increase of nearly 21%.

gold price forecast

The Fed raised rates 0.25% at its December meeting. The central bank has hinted it's leaning toward at least two more increases this year, and at least two in 2018.

Combined with the other catalysts we've looked at here, that should send gold well on its way to testing its all-time high of $1,895 reached in 2011.

But this last catalyst will get it there...

Gold Price Forecast Catalyst No. 6: The "Fear of Missing Out"

Like many investments, gold has a "psychological element," Patalon said. Negative sentiment pushes prices lower than they ought to be, while positive sentiment does the opposite.

Gold is also cyclical. The yellow metal is currently entering the 64th month of a bear market - its longest ever. When gold prices start to rise, it will signal the next gold bull market. On average, gold bull markets last about 63 months and result in average gains of 385%.

Part of those gains are from the reversal in sentiment.

"When there's a major run-up in gold, that creates a buzz," Patalon said. "People start to chase the metal. There's a fear of being left behind."

The only question is how to make the most of it...

How to Profit from Gold's Bull Run

Just about any investment in gold will pay off handsomely as prices rise. If you have a favorite type of investment, such has gold coins or the SPDR Gold Trust ETF (NYSE Arca: GLD), you can add to that.

But for maximum gains, Patalon says you should consider buying a gold mining stock. That's because gold mining stocks tend to amplify the price of gold, delivering as much as twice the gains of the yellow metal.

And while there are several solid gold mining stocks, Patalon's favorite is Goldcorp Inc. (NYSE: GG), which he first recommended about a year ago. He was impressed that the company opened up the database to one of its mining sites to let the public help pick places to dig.

The gamble paid off - about 80% of the sites identified by the public yielded gold.

But Patalon likes Goldcorp's fundamentals, too. The company has reduced debt and has one of the lowest all-in sustaining costs (ASIC) numbers in the industry. The lower the ASIC, the more profit earned from each ounce of gold mined.

"Goldcorp is one of the better-run major miners. If there's any kind of prolonged rally in gold, as I expect there will be, Goldcorp will be a big beneficiary," Patalon said.

But as much as Patalon likes Goldcorp, he's found another, even better way to play the coming gold rally.

He believes this stock has the potential to deliver returns of up to 10,000% over the next few years... you can find out more about this opportunity here.

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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