VanEck Founder: Gold Pullback Recently, But Long-Term Gold Bullish Outlook Remains Intact

Author: Jan van Eck, Founder and CEO of VanEck; Translation: xz@Jinse Finance

Recent pullbacks in gold have raised some questions about our long-term bullish outlook, especially given gold’s strong performance over the past year.

I would like to share some observations on the dynamics we’ve seen:

1. Short-term Dynamics:

Technical positioning has previously been significantly overextended, with gold prices trading well above their 50-day moving average for an extended period. In the past 24 hours, prices even dipped below the 200-day moving average, reflecting a notable correction. I recently mentioned in an interview with Bloomberg that such pullbacks are typical in a long-term bull market.

Middle Eastern energy producers are under liquidity pressure. Due to disruptions caused by the Iran conflict affecting oil and natural gas revenues, sovereign entities are likely to sell liquid assets including U.S. Treasuries and gold to meet short-term funding needs.

Speculative positions in global gold ETFs have accelerated over the past 3-6 months. During price declines, rapid liquidations can increase downward pressure. This appears to have occurred in March.

Global wealth and growth dynamics, especially from the Middle East and Asia, are key long-term drivers, but they have been directly impacted by the Iran conflict.

2. Long-term Drivers:

The increase in U.S. defense spending and rising interest rates are amplifying risks associated with fiscal deficits. While short-term rate hikes may pressure gold prices, these dynamics could ultimately reinforce gold’s role as a long-term store of value.

Global wealth growth is expected to resume, boosting demand for gold from private investors and central banks.