By Bob Bryan
Gold has taken off in the past week as part of the post-Brexit "safe haven" rally. The precious metal jumped as much as 7% the day after the UK voted to leave the European Union and has stayed elevated since.
This rally, however, isn't to be trusted, according to John LaForge at Wells Fargo Investment Institute, since gold is in a long-term downward trend.
"History says that short-term rallies are not likely to last inside a commodity bear super-cycle," LaForge wrote in a note to clients Thursday.
"And, in our opinion, gold is comfortably stuck inside a commodity bear super-cycle. As for an ideal entry point, history suggests that gold could eventually retest its lows this cycle, around $1,050 per ounce."
LaForge is of the opinion that commodities operate in super-cycles, decade-plus bull and bear markets, as long-term supply and demand structures shift. As with the downturn in the 1980s, this super-cycle began with a leg down for precious metals, then food prices, and now, finally, oil. Thus, this short-term bounce in gold is unsustainable.