Time For Gold To Wake Up

 Last week was highly volatile. Gold had a pretty short covering on Friday as it ranged from $1790 - $1815, but just within a few hours, it reclaimed back $1785 - $1790. Silver, on the other hand, was up to nearly 10% in the past 4-5 weeks. And now, after forming a base near $23.75-24.00, it steadied for $25.50 early this week.

Yellen said categorically that this higher inflation could last until mid-2022. In retrospect, small investors remained negative towards gold concerning gold ETF holdings falling consistently over the last two weeks. With the US Dollar forging a temporary lower low to start the new week, we give the edge to the bull camp and bullion dealers in India. As indicated already, surging Bitcoin and other inflationary signals could finally be "waking up" gold and silver!

The US markets are again hitting new life highs with Tesla staying under the spotlight as it attained a $1 trillion MACAP. Gold almost hit our target near $1713, but silver legged the momentum. Gold ended above $1800 on Monday for the first time since 14th September. But gold will face a hurdle in the short term by staying near $1815 - $1820. It could see a big round of short-covering while taking out of this band. However, before that, $1795 - $1800 consolidation is possible.

There was a slight recovery in the dollar, but this was not a good thing for gold and gold dealers in Mumbai. However, prices are not expected to fall sharply, as investors have realised that the bigger picture is even more uncertain and that risks are still just behind the corner.

Gold prices fell on Tuesday after a five-session rally, as the dollar steadied, and investors awaited key central bank meetings for clues about rate hikes amid rising inflation concerns. Investors have shifted focus to the policy meetings of the Bank of Japan (BoJ) and Bank of England, and the European Central Bank (ECB) due on Thursday, followed by next week’s U.S. Federal Reserve. The US GDP data for the third quarter was also on their radar.

Gold is often considered as an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, increasing non-interest bearing bullion’s opportunity cost. Gold should remain relatively well-supported in the current inflationary environment until we get a hawkish pivot from the Fed.

Given the tremendous inflation pressures currently exerting themselves in the economy, the late 1970s may be the best model for what to expect going forward. It would mean the rising price levels are combined with a weak economy (stagflation). And given that the US debt load today is over four times higher as a share of the economy than it was in the 1970s, investors should brace for the potential of a far greater financial crisis. When it comes to a financial crisis, investors will want to have gold on their side based on data from yesteryear, pleasing the gold dealers in Mumbai. It is well known that in times of uncertainty and a financial crisis, gold has always proved its worth as it has vastly outperformed other assets in its class.

From a micro perspective, investors only have to look at the current market landscape, and as many analysts are eyeing inflation as the next major market disruption. The talks of stagflation, higher interest rates, and low economic growth could provide the perfect backdrop for investors to start adding gold. Should the markets get shaken up again, gold can offer an ideal respite from equities exposure.

Gold Rallies Over Inflation Worries

 The Fed is pursuing a program of “buying up the world”, which is very easy to do if one has the capacity to create infinite quantities of money out of thin air. A big reason for the lockdowns was to stifle the huge inflation that this policy would otherwise engender by killing the economy – the name of the game is wealth transfer, up the pyramid to the very top. This operation is working well for them, which is why the stock market has marched ever higher as the economy has collapsed, so much so that it is hard to see why they would change the course.

After CPI at 0.4% monthly growth and a 13-year high, there is a sense of fear from the US Fed to IMF as to what might unfold on the inflation trajectory going forward. On Wednesday, gold zoomed by +$40, i.e. 2% on Comex, to close above $1785-1790, which is a crucial barrier and now eyed above $1810. Just a month ago, gold was observed trading at these levels only.

Gold prices hit a one-month high on Thursday as the US Dollar and US bond yields eased, while investors and the largest bullion dealers in India assessed how strong inflation data could shape monetary policy. Spot gold rose 0.4% to $1,799.30 per ounce by 1100 GMT, having earlier hit its highest since Sept 15 at $1,799.95. US gold futures gained 0.4% to $1,801.30. The US dollar and benchmark US 10-year Treasury yields slipped. And by the rule of thumb, a weaker dollar makes gold cheaper for buyers in other currencies.

Gold rallied after data showed US inflation rose sharply. Prices paid by US consumers rose 0.4% from August. In comparison with a year ago, the CPI rose 5.4%, matching the largest annual gain since 2008. The broadness of price rises suggests the likelihood of that being transitory is falling. We witnessed the Treasury yields fall, and the weakening of the US Dollar resulting in strong support for the precious metals, with spot prices threatening to break above $1,800/oz. This is despite the Fed indicating it would likely start tapering in mid-November or early December. They don’t care if it leads to hyperinflation, which will crush the little guy but not affect them. But naturally, if hyperinflation it is, then gold and silver will soar, leading us to like silver so much here. Now, of course, if gold and silver soar, then so will other commodities like copper, all of which you can find at any gold dealer in Mumbai.