Gold Price Forecast: Prices Likely to Go a Lot Higher

Prices Likely to Go a Lot HigherOver the next few months, you could make double-digit gains in one of the most beaten-down commodities on Earth: gold. At least, that’s the latest gold price forecast from CNBC contributor Mike Khouw. (Source: CNBC, last accessed August 20, 2015.)

“This is one of the first times in a while that we’ve seen options traders bet on a rebound,” Khouw said on CNBC’s Fast Money earlier this week.

On Wednesday, options volume for SPDR Gold Shares (NYSE:GLD) ran 1.5 times its daily average. One trader bought nearly 12,000 of the September weekly $112.00 strike calls for 20 cents each, betting that the exchange traded fund (ETF) will continue to rally over the next two weeks.

Purchasing a call option gives a trader the right but not the obligation to buy a stock at a certain price for a given time. This trade represents a bullish bet that GLD will rise above $112.20 by Friday, Sept. 4th.

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“We don’t quite know how this will end,” Khouw explained. “But if gold’s bear market is similar to the one in the early 1980s, it may still be marked by some significant rebounds.”

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The CNBC contributor went on further to explain that from its peak price in 1980, bullion declined by 40% before bottoming out and rallying again, only to enter another bear market. What this essentially means is that today’s gold price could likely rally in the same way, even if it does dip again on this latest fear of the fed’s rate hike in September.

Of course, Khouw isn’t the only investor bullish on gold prices. Earlier this week, SEC filings revealed that billionaire Stanley Druckenmiller purchased $300 million of the GLD ETF. Other well-known money managers, including D.E. Shaw and Ken Griffin also initiated or increased the size of their stakes in the ETF last quarter.

What could all of these Wall Street titans see in this precious metal? It could mean only one thing: they see gold prices going a lot higher.