Summary
- Gold has been going through a correction for months now.
- Yes, it is still all about the Fed.
- Gold could trade down to around the $1,400 before going higher again.
- Nevertheless, the Fed will still need to expand the monetary base due to America's massive national debt problem and the likelihood of an upcoming recession.
- Longer term, gold and gold related assets are likely going much higher.
- This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Get started today »
Source: AsiaTimes.com
Gold has been in a downtrend for more than three months now. Ever since the yellow metal hit a price of roughly $1,566 in early September, gold has been melting, making lower highs and lower lows. Gold is now roughly 6% below its recent highs and appears to be stuck in a prolonged downward sloping trading range.
Image Source: StockCharts.com
The problem? The economy seems to be back in stable mode, the employment picture is robust, inflation is in the Goldilocks zone, and the stock market is back at new all-time highs. Therefore, the Fed is not likely to cut rates any time soon, which is putting pressure on gold and other precious metals (PM) related prices.
However, this may be a short-term phenomenon, as the economy could start to weaken once again in 2020. Furthermore, the economy has shown an inability to function effectively with interest rates at marginally higher levels. Additionally, fundamentally not much has changed from a long-term perspective, as the U.S.’s national debt continues to spiral out of control and the inevitability of a recession are still on the horizon.
Despite the likelihood of a period of relative calm and subdued price action in the gold, GSM (gold/silver/miners) market, this segment is likely to do particularly well long term as prices are likely to appreciate substantially over the next several years as well as decades.
Yes, It’s Still All About the Fed
I recently wrote about the remarkable resilience of the U.S. economy, as the latest employment, inflation, and perhaps most importantly consumer data has been coming in stronger than expected. The bottom line is that with an “official” 3.5% unemployment rate (lowest in about 50 years), inflation below 2%, and with the stock market raging on to new all-time highs, the Fed is not going to lower rates.
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I think gold is in a secular uptrend, looking for a target of $1700 within the next 2 yrs, but some on Wall Street are staying it could hit $3000 in 2020.