Gold is an undervalued asset. The gold price has reached a new all-time high, in order to consolidate in a healthy way from massively overbought territory.

This does not mean that the previous price increase – with respect – was completely for nothing. Because the fundamental reasons for the price increase are still intact – and the gold price actually has the potential to rise much higher. In addition to the constructive fundamental factors, the technical picture is still optimistic.

Gold Consolidation: Gold Price Leaves Overbought Territory Source: StockCharts.com

Gold consolidates after all-time high and leaves overbought territory. The supports at the moving averages have not yet been touched.

Positive Gold Outlook In the end, it is the sentiment that must ensure that the gold price resumes its overall uptrend. Such a sentiment improved for the gold price has the potential to drive it and gold stocks to much higher levels next year.

Most high-quality gold stocks are still traded at low multipliers. Not to mention junior gold miners and exploration companies that are so undervalued that you almost get the feeling that gold exploration is no longer needed.

To justify the current valuations, the gold price would have to fall very low. Instead, gold is establishing itself above the $2,000 mark.

Because the sentiment says: The US Federal Reserve really has little choice but to move to a looser monetary policy as soon as possible and create a more accessible financial environment in the coming years. That’s what the stock markets say at least. If the Fed doesn’t deliver, there will at least be a correction. For the next crash, a trigger is needed.

Either way…the Fed will have to be loose again at some point. That is anyway the perfect environment for gold, which develops particularly well during easing cycles.

But the fact that gold has also developed strongly in the current tightening cycle (gold has gained 9% since the start of the year) speaks very clearly FOR gold. This is due to the fundamental factors with the high physical demand especially from emerging countries, the production side suffering from rising costs and, in the case of juniors, access to fresh and inexpensive capital, and the fact that we find ourselves in worrying geopolitical times.

Therefore, I remain with my assessment and am on the lookout to use the upcoming low.