Gold's price prospects look positive in 2022, said Gareth Soloway of InTheMoneyStocks.com. But investors should be wary of the oil market.
Gareth Soloway January 2022youtu.be
Gold has spent the last year and a half or so consolidating after reaching its highest point ever in mid-2020, and for some market watchers that price activity has been disappointing.
Speaking to the Investing News Network, Gareth Soloway, chief market strategist at InTheMoneyStocks.com, said that the yellow metal is behaving similar to how it did in the 1970s.
He explained that in the early 1970s, when there wasn't much inflation, gold experienced a big move up, much as it did from 2018 to 2020. Around 1975 to 1976, when inflation started to rear its head, gold consolidated for about two years — this is just like what's been happening since the precious metal hit its all-time high.
Importantly, said Soloway, gold had another big jump in the 1977 to 1978 timeframe, going from the US$100 per ounce level all the way up to US$800. He doesn't think gold will experience that extreme of a jump in 2022, but does expect "a big move to the upside" given how comparable the inflation data looks between then and now.
Looking longer term, gold's prospects are even brighter. "Do I think we can go to US$3,000 to US$5,000 in the next five years? Yeah I do," Soloway said. "I actually do think that is a possibility because again, I'm so doubtful that the (US Federal Reserve) can ever really fully tighten and remove all monetary policy."
Aside from gold, Soloway also shared his thoughts on oil, which he believes could be headed for a downturn. He still thinks the commodity could rise as high as US$90 to US$100 per barrel, but those elevated levels may not last.
Again looking to the past for guidance, Soloway said his concern is that oil may replicate what it did from 2007 to 2008. He noted that the stock market topped out in 2007, but the 2008 stock market crash led to investors turning to oil, which ran to US$145.
Soloway noted that the reason that happened is when a bear market starts, institutions don't exit the entire market — they look for areas of safety where money can still be made. For example, they sell tech stocks and money flows into oil.
However, after the crash the Fed began tightening and the economy was slowing, leading oil to eventually follow the stock market lower and plunge to US$55 in January 2009. He's worried that 2022 may see a similar pattern.
"So oil continues up, money just keeps going in there, it pushes it up, up, up, and all of a sudden because of the tightening of the Fed just like in 2007 the economy starts to sputter, which now takes away the reason why oil has gone up so much, which was demand — and you start to see oil collapsing," Soloway commented in the interview.
Watch the video above for more of his thoughts on the market.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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