Is Gold Set Up For a Big Bull Run?

Is Gold Set Up For a Big Bull Run?

$XAU, $GLD, $SLV. $USD

FLASH: God has closed over $1,400 oz the highest in 5 years.

The spike in price followed news the Fed may act “Dovish” and cut rates as soon as July.

The Fed predicts 1 to 2 rate cuts in its set of economic predictions, but not until Y 2020. Despite cautious wording in the post-meeting statement Wednesday, markets are betting the Fed cuts, as soon as July.

In their most recent FOMC meeting statement, the Fed maintained rates, but what set the market ablaze were two key pieces in that statement and a comment made by Chairman Powell.

Here are the Keys to the action from the FOMC statement:

1. In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.

2. Voting against the action was StL Fed Pres James Bullard, who preferred at this meeting to lower the target range for the federal funds rate by 25 bpts.

Mr. Bullard wanted to cut rates now, and the Fed seems to be hinting it will act to sustain economic expansion if it gets the right information, which usually means cutting rates.

Fed Chairman Powell then opened the way for possible future rate cuts by saying the following in a press conference: “Many participants now see the case for somewhat more accommodative policy has strengthened.”

Not long after, gold prices responded positively to the news see chart above.

The recent spike may be good news, but it is possible gold might be breaking down a few barriers and setting up for a longer-term trend.

The important aspect of this run North is that it isbreaking through important round psych resistance marks, so we have technical’s adding to the fundamental shift in monetary conditions, now add weakening USD and there is good reason to expect a good performance from gold.

Historically, when USD weakens substantially, the value of precious metals such as gold and silver generally rises because they represent safe-havens and stores of value for investors.

The global fundamental backdrop is murky, which is keeping a flight-to-safety trade alive. But with real yields on bonds declining, gold’s appeal as a safe haven is growing, all while a weaker USD is supportive of commodities broadly.

After the Ys 2008-09 recession and the Fed easing that followed, gold prices charged North, peaking at over $1,900 in late Y 2011.

It remains to be seen if this spike in price will continue to develop into a longer-term Bull run. But some of the ingredients that support such a trend are there, like geopolitical tension, uncertainty in the market, and a renewed interest in gold.

Silver prices also saw a boost after the Fed meeting.

As I have written in this column many times this year gold belongs in every investors portfolio.

Have a terrific weekend

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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