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Gold: Wall Street Versus Main Street

At recent lows around $1075 an ounce, gold has been trading at the lowest price level since February 2020. And, in recent days, the metal has been consolidating in a narrow range just under $1100.

Now, it looks to me like gold is poised to break out one way or the other – but the question remains “Which way?”

The answer may depend on some exogenous “outside the market” development, possibly a sharp sell-off in world equity markets or a spate of negative economic indicators making it less likely the Fed will raise interest rates this autumn as most pundits expect.

Gold may be out of favor on Wall Street . . . but not on Main Street.

While many hedge-fund managers, institutional speculators and the financial press have railed against the yellow metal, retail investors around the world have seen a bargain at recent lows and have stepped up their purchases of physical gold.

More than anything else, it has been the U.S. Federal Reserve’s ambiguous interest-rate policies that have weighed heavily on the metal. Financial-market expectations of an imminent increase in interest rates have driven the U.S. dollar’s exchange rate higher against key foreign currencies.

Today, the dollar index stands at a 12-year. As the greenback has appreciated, gold priced in dollars, has fallen along with oil and many other commodities priced in U.S. dollars.

Simply put, institutional speculators – including the big bullion banks – have shorted gold on futures and other derivative markets while ETF-investors have dumped bullion, driving its price lower, and, at the same time, supplying Shanghai and other eastern markets with physical metal.

Indeed, it has been the continuing flow of gold from Western to Eastern markets that explains why gold has performed so poorly in the face of continuing strong demand from the large Asian markets.

Despite gold’s disappointing performance in the past three years – and the real possibility we could see further weakness in the days ahead – I believe gold will perform exceedingly well versus most other investment assets over the next five-to-seven years.

When institutional-investor attitudes toward gold improve – and the flow of gold from Western to Eastern markets – diminishes, the shortage of available metal will be reflected in sharply higher prices for the yellow metal.

Gold: Asia to the Rescue

I’m just back to my desk from a fact-finding mission to Shanghai and other Asian gold-trading centers where I met with gold importers, traders, jewelry manufacturers, retail outlets, and exchange officials. The key take-away: Just as weakness in Asian markets may have contributed to the latest gold-price slump, an imminent recovery of physical ...

Gold: Watching the Fed

The U.S. economy has rebounded from its winter slump – but recent data continue to present mixed signals, leaving the Federal Reserve and most Fed-watchers alike uncertain about the timing of the much-anticipated first step-up in the Fed funds interest rate. One thing is for certain: The gold market and other financial markets already expect the ...

Gold: Now is the Time

If investors ever needed physical gold in their portfolios, now is the time. Now is the time to protect even a well-diversified portfolio against the risks inherent in financial assets (equities, debt) and tangible assets (real estate, fine art, etc.) alike. Here’s some reasons why: If you hadn’t noticed, geo-political uncertainties are at a ...

Gold: Range-Bound for Now

In the short term, perhaps through midyear or longer, gold prices will likely remain “range-bound,” trading mostly between a floor price of $1175 and a ceiling around $1225. As these boundaries are approached or briefly broached, technical traders will continue to step in as buyers or sellers, respectively, keeping the yellow metal’s price ...

Waiting for the Start of Something Big

We've said it before, but its worth repeating:  A reassessment of U.S. economic prospects – and revised financial-market expectations of prospective Fed policy – sometime in the next few months could support a spring-summer recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.   Until that happens, gold ...