VanEck Founder: Gold has recently pulled back, but this does not affect the long-term bullish outlook for gold

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

The recent pullback in gold has raised some questions about our long-term bullish outlook on gold, especially against the backdrop of gold’s strong performance over the past year.

I would like to share a few insights on the dynamics we are observing:

1. Short-term Dynamics:

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

Middle Eastern energy producers are facing liquidity pressure. Due to the war in Iran disrupting oil and gas revenues, sovereign participants 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. The price decline phase may lead to rapid liquidations, increasing downward pressure. This seems to have occurred in March.

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

2. Long-term Drivers:

Increased U.S. defense spending and rising interest rates are amplifying the risks associated with its fiscal deficit. While rising interest rates may pressure gold prices in the short term, these dynamics may ultimately reinforce gold’s role as a long-term store of value.

Global wealth growth will recover, thereby boosting gold demand from private investors and central banks.