Gold Sells Off Again While gold bounced yesterday on rumors of a dovish favorite for the new Fed Chair, it’s down again today.
What does this mean for gold bulls? Dear John, I saw a great tweet today in my Twitter feed: “It’s hard to be both impatient and a gold bug.” Yep, if you’re the impatient sort of investor, then waiting for the big break-out in gold can wear on your nerves.
Take this year, for example. We had another big rally in gold in the first half of the year, from around $1,140 in January to nearly $1,350 by early September. But it was a stair-step advance, with each interim move upward followed by a fairly steep, worrisome correction.
We just couldn’t get sustained momentum. At least not long enough for our leveraged mining stocks to take off.
Now, we’ve had some big winners in Gold Newsletter by picking up undervalued companies earlier in the year, as well as some exploration picks that were on the trail of big discoveries.
But it’s been frustrating. And never more so than recently. Swung By Shifting Sentiment After hitting the year’s high point early last month, gold fell in a steady decline to around $1,270 by early this month. But then it began a nice rebound, poking above $1,300 once again a week ago...only to be subjected to more selling through most of this week.
Today it’s down about $10 to around $1,278.
The problem is that gold has been swung back and forth by the shifting winds of trader sentiment. Yes, physical demand has returned, particularly in Asia where China has returned to the market after its Golden Week holiday and as the Diwali Festival boosted buying in India.
But physical demand doesn’t set the market price anymore. That’s dictated by hot-money speculators in paper gold.
And those traders are only worried about the daily headlines. Things like the prospects for tax reform to the anointment of the next Fed Chair to soaring stocks and cryptocurrencies stealing money away from metals, and much more. In short, as rumors and headlines change from day to day, gold is being tossed to and fro by the shifting winds of trader sentiment. As an example, gold jumped about $9.00 yesterday after Politico reported, once again, that President Trump was leaning toward appointing Fed Gov. Jerome Powell as the next Fed Reserve Chair.
Powell is perhaps the most dovish of the remaining candidates, and in the conversation for the most dovish Fed president or governor. So on this rumor, stocks reversed course (they’d been down significantly all day) and closed in the green. The dollar fell and gold rose.
But then today, the dollar and U.S. stocks rose on renewed confidence that Trump’s tax reform plan would pass. And gold was sold off in response.
More evidence of the fickle nature of today’s market: Gold prices briefly surged this morning on news that Fed Chair Janet Yellen was visiting the White House. When it emerged that it was nothing more than a routine visit to Trump’s chief economic advisor, Gary Cohn, gold’s brief rally was cut short.
Bottom line: What we don’t have, and need, for a consistent rally is a fundamental monetary reason for gold to rise.
Don’t worry — it’s going to come, likely when the Fed’s next meeting concludes on December 13. The Fed To The Rescue? As you know, I believe the Fed’s announced intention to raise rates at that meeting sets us up for a repeat of the pattern of December 2015 and December 2016, when year-end rate hikes served as launching pads for major rallies.
I think we’ll see a similar performance by gold, regardless of whether the Fed raises rates this time or not. • If they raise rates, it will remove the selling pressure on gold, as before, when gold shorts close out their trades.
• If they don’t raise rates for some reason, investors everywhere will recognize that the Fed doesn’t think the economy can weather higher rates — and the resulting rush into gold will send prices even higher. Of course, investing is rarely this easy, and such an obvious pattern is eventually attenuated in the markets.
Consider that gold took off almost immediately after the December 2015 rate hike. But it took a couple of weeks after the December 2016 hike for the metal to get going.
So we may see gold rise in anticipation of the Fed’s December meeting, or it may be delayed as bears mount a counter-attack to keep the price in check during the thin year-end trading.
Regardless, I expect another strong move in early 2018 as shorting pressure is alleviated and as the Fed’s desire to raise rates is, once again, quelled by economic realities.
And that means we have a great opportunity over the next couple of months to take advantage of bargains the market may hand us.
I’ve got a number of companies on my watch list, and plan on coming out with some exciting new recommendations in Gold Newsletter and our Gold Newsletter Alert Service.
You can subscribe to either of those services at a discounted price by clicking on the links above. And I urge you to do so — we’re faced with a remarkable opportunity right now in metals and mining shares, with the Fed on schedule to help us out no matter what it does.
In addition, I’m going to get lots of great information at next week’s New Orleans Investment Conference, from speakers, attendees and participating companies alike.
I’m going to report on all my insights and discoveries — including new picks — in Gold Newsletter. I’ll also give you my impressions in upcoming issues of Golden Opportunities.
So stay tuned...and stay the course. Gold will reward us for our patience. All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference P.S. I covered many of these topics in detail in a recent interview with Kerry Lutz of the Financial Survival Network.
CLICK HERE to listen. |
