Chair Powell Is About to Dish You a Slab of Dovishness
We’re in the thick of it now.
Gold has already traded above $2,000/ounce for several hours and my favorite bullish indicator remains well intact.
NO ONE is really excited about the gold rally; maybe it’s because silver isn’t really sitting as co-pilot yet, or perhaps it’s because the media thinks that it has to do with the banking crisis and not with the FED pivot. Whatever the reason, media coverage of gold’s surge is underreported, which translates to fewer speculators in the mix and that tells me we are far from a top.
If you expected something fancy, I am sorry to disappoint.
When the media is covering gold, the cheerful latecomers buy. I want no part of that, but when I see mostly indifference to higher prices and near record highs, I know there are still gains to come.
What SVB’s collapse showed was that the banking industry is vulnerable to the rate hikes, and that sealed the deal on hawkishness as the primary message.
That alone was enough to re-price gold, but what will totally make this transformation complete are rate cuts.
Rate cuts will bring the housing sector back to life and might lift America’s GDP growth from its slump.
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If the economy can find a path to remain in growth mode, even if that growth is sluggish and moderate, gold will find its footing in the range of $2,300 to $2,500.
If rate cuts prove too late in preventing the derailment of the U.S. economy, gold could trade above that level and even kiss $2,700.
When Wealth Research Group placed a price target of $2,582 for gold in September 2018, as tariffs and autopilot rate hikes caused investors to rush to cash, we reasoned the markets would reject funding costs that interfere with zero rates.
Gold bottomed three days after that publication, but the reasons that were presented there don’t apply anymore.
The case for gold in 2023 is more inclusive.
De-globalization is inflationary and the U.S. isn’t going back on this trend, nor are other global powers.
Replacing the existing order with a new one is an inflationary procedure, and if the FED handles it wrongly, it will only prolong it.
Bank failures prove that the FED can’t stop or alter the inflationary trends of the services sector, and only time and the efficiencies of the free market will do that. In the interim, the dollar will weaken from the inflationary bust of the tech sector.
In the words of the greatest gold investor I know: “Gold is the center mass of the monetary universe.”
In my PORTFOLIO, MarketAxess (MKTX), a leading bonds trading platform, which trades inversely to interest rates most of the time, is up 35% in 2023 so far! This tells you that Smart Money is entirely on board with the FED turning dovish!
That’s great for precious metals.
Best Regards,
Lior Gantz
President, WealthResearchGroup.com
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