Is Gold Ready for the Next Big Run?

10/26/2011 3:49 pm EST

Focus: COMMODITIES

A.J. Monte

Chief Market Strategist, The Market Guys, Inc.

Technical analyst A.J. Monte shares a surprising long-term forecast for gold and silver in this exclusive interview last month with MoneyShow.com, but cautions investors to take a cautious approach.

Does gold still have more luster? We’ll ask AJ Monte. Hi, AJ. How are you?

Good, thanks.

Now recently, gold hit $1,900 an ounce.

Amazing.

And then it sold off. Came back. It’s been bouncing around. When you take a look at the charts on gold and look at where it’s been and where it’s going, what do you see?

Well, in a few weeks I would have to say gold is looking a little overextended, if I could use that. Overboard’s another term that I can use. I’m not saying I’m turning bearish on that particular market because I still think it has a lot left in the long-term trend; however…

Let me stop you right there. How far do you think it can go in the long term?

This is going to sound crazy. I think you could see $5,000…

$5,000? We’ve seen some people calling for that. A lot of people also saying around $2,500 or so. Why $5,000?

Well, if you look at that, you’re talking about a 300% move roughly from this point, and if you look at some major stocks like Bank of America (BAC), I mean to think, why could a bank stock like Bank of America? People won’t even think twice about that stock going from $7 to $21, because they know that in the past the stock has been at that point.

We’re talking about not just a commodity here, but we’re talking about a world currency. It’s always been a currency in its own form, and with the fear factor that’s out there—what’s going on economically—I think people are looking for a safe haven. Where do you put your money?

At what point do you think it could get to $5,000?

I think over a five-year period.

Over the next five years?

Over the next five years, been very bullish. Silver even more so, percentage-wise. Short-term, I’m looking for silver to get up to the $47 level.

That was about where it peaked in May, right?

Yeah. When I left the trading floor in Comex…this was after the Hunt brothers cornered the market…

In 1980, right.

You know, I saw silver go up to those levels, and percentage-wise it was incredible. So you’re dealing with a very volatile market, so I wouldn’t say just jump in and sell the house and the dog and the kids to go buy gold. You really want to be careful in how you manage your position.

Let’s go from the long term to the present. You say the gold could look a little weak over the next few weeks. How low do you think it will go? Where are its support levels? What do you think? It’s also not a great period for gold seasonally, is it?

No it’s not. In fact, what I think what we’ve seen is an honest correction. In percentages, I think you could see at least a 10% to 15% pullback from the highs.

So you’re talking like $1,500 to $1,600.

It could. It could very well go to that point, but here’s the other thing. Technically, a stock or a commodity or a currency needs to correct. What I mean by that is prices need to come back to a mean or a moving average before the institutions would feel comfortable loading back up on it. There’s a lot of institutional interest there, so don’t overlook that.

So basically, down for awhile and then much, much further up.

Yeah, and again, I’m a cautious buyer when I see the support level hit, but right now I’ve recently unloaded my position in gold to get to the cash to be able to buy back in.

If it looks technically like it starts to move sideways and doesn’t correct or pull back, that’s as good as a pullback. If a stock or commodity starts drifting sideways, you’ll see the buyer start to get more confidence and come back in at that point.

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