Gold prices have skyrocketed since 2022, and investors are yet to apply the brakes on the rally. The XAU/USD index is trading comfortably above the $4,000 range on Monday after experiencing a brief dip. It has risen close to 55% year-to-date and is among the top-performing commodities in the market. However, Chris Vermeulen, Chief Market Strategist at The Technical Traders, warned that gold prices could soon experience a violent crash, similar to the 2008 downturn.
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A Violent Crash Is on the Cards For Gold Prices, Says Financial Analyst
Chris Vermeulen compared gold’s rally to the 2008 crash, where it experienced a major dip due to the economic crisis. He stated that there’s going to be another economic reset and prices of all assets would come down. “It’s going to be more like 2007/2008, where it’s going to be just a sharp, violent pullback. I think we have an economic reset, and when gold finally does peak, it’s probably going to pull back 30%, 34% or 35% somewhere in there,” he said.
In the last two years, investors have accorded gold the safe-haven status. Central banks, retail investors, and institutional funds have been accumulating the precious metal nonstop. However, after the XAU/USD index climbed above $4,000, the asset has recorded significant outflows. This occurred due to sell-offs and profit booking, and is a natural market correction. Gold is yet to see a violent crash as the market is finding the glittery metal lucrative.
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The analyst predicted that gold prices could see a violent crash of between 30% to 38%. “I do believe, eventually using just Fibonacci retracement based on the size of this run, there is potential for gold to pull back to the sweet spot. And the sweet spot is between a 38% pullback all the way,” he summed it up.