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As stocks have taken a dive this week, gold has rallied to its highest levels since July closing at $1,233.20 on Tuesday.
But in an interview with CNBC on Tuesday, John LaForge of Wells Fargo Investment Institute warned that this rally is on borrowed time and will take a turn in a matter of months, or even weeks.
When asked if the gold rally had sustainable legs, LaForge said “It does… short term though. … You probably have $100 of upside from here. Unfortunately, you probably have $100 of downside, too.”
$100 downside would push gold down to its lowest level in nearly two years. And while the precious metal is up around 3% in the last two months, it’s still down about 6% for the year and is in what LaForge called a “bear super-cycle” since hitting its peak in 2011.
LaForge believes this super-cycle could last another five years with prices ranging from $1,050 to $1,400 per ounce.
“We expect another five years or so of the bear, which means capped price rallies, and lots of sideways price action. Gold’s range for the rest of the bear super-cycle we suspect will be close to $1,050 to $1,400,” LaForge said.
“We still have way too much supply even at $1,200 for gold,” he noted in the interview.
“What that means is we had a period from 2001 to 2011 where gold went from $250 an ounce all the way to almost $2,000. It brought out all kinds of supply. We had everyone and their mother out looking for gold in the world, and they found it. So, the price of gold has been sinking ever since.”
While LaForge is not bullish on either metal, he thinks silver is a better option than gold right now as it has more upside potential and is in more limited supply. He expects silver to stay in a range between $13 and $22 over the next five years.