Gold - Upcoming Fed Meeting and Negative Yield Insurance
As my last forecast has shown, gold has had quite a lovely run up in light of the rate cut delivered from Jay Powell Gold soared towards $1,600/ ounce and stopped just shy at $1,570/ ounce.
With the September FOMC decision looming the question is what the yellow metal will do next?
A rate cut is all but certain, with a 25bp cut baked in at this point, a 50bp cut is possible but the chances are lower (not impossible mind you).
This rate cut is likely to do two things
- Push bond prices higher and yields lower (I will also elaborate on a potential play on bonds )
- Drive gold up as bond yields creep closer to zero (Europe is already at zero and the US is the last major bastion of 'safety')
The impact on silver is more uncertain, as rates are also a measure of productivity in general and silver is primarily an industrial metal, long-term silver looks good, but bear in mind it does not respond the same as gold.
The gold price near-term is impossible to predict, but lower rates and near zero yielding bonds means only one thing...higher gold prices.
We could see some consolidation going into the FOMC meeting, at which point gold would be poised to make another leg up (although on the longer time-frames gold is a little overextended) or we could see a short lived selloff.
In any case, if you have yet to position yourself for a negative yielding world, best to do so now
With the September FOMC decision looming the question is what the yellow metal will do next?
A rate cut is all but certain, with a 25bp cut baked in at this point, a 50bp cut is possible but the chances are lower (not impossible mind you).
This rate cut is likely to do two things
- Push bond prices higher and yields lower (I will also elaborate on a potential play on bonds )
- Drive gold up as bond yields creep closer to zero (Europe is already at zero and the US is the last major bastion of 'safety')
The impact on silver is more uncertain, as rates are also a measure of productivity in general and silver is primarily an industrial metal, long-term silver looks good, but bear in mind it does not respond the same as gold.
The gold price near-term is impossible to predict, but lower rates and near zero yielding bonds means only one thing...higher gold prices.
We could see some consolidation going into the FOMC meeting, at which point gold would be poised to make another leg up (although on the longer time-frames gold is a little overextended) or we could see a short lived selloff.
In any case, if you have yet to position yourself for a negative yielding world, best to do so now
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