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GOLD: TREADING WATER

One big surprise in the world of gold thus far this year has been the metal’s lack of price volatility. This despite: All the uncertainty associated with a new, and somewhat maverick, president in the White House compounded by a dysfunctional and highly political Congress, The coming withdrawal of Britain from the European Union and the possibility the French will follow suit by pulling out of the EU too, The rising tensions between Russia and the United States on two fronts (Ukraine and Syria), And, most recently, rising North Korean bellicosity, the real possibility the ...

Surprise, Surprise!

Despite last week’s move by the U.S. Federal Reserve, America’s central bank, to tighten monetary policy a notch, gold prices surprised many observers of and participants in the gold scene who had expected the quarter-point increase in short-term interest rates would be sufficient to knock the metal into a still-lower trading range under $1,200 an ounce. After all, higher interest rates are widely perceived as a negative or bearish influence on the gold price. But, as noted below, it is really the “notional” real “inflation-adjusted” rate of interest, that matters, not the “nominal” rate as ...

Interest Rates, Inflation, and Trumpian Troubles Point Up for Gold

Gold prices of late have been testing support just under the market, if you will, preparing for a healthy rally into higher territory. As I see it, a relatively small group of hedge funds and institutional speculators have been calling the tune for gold, trading the recent range, buying on dips, selling on rallies, and gradually adding to their physical holdings – a behavioral pattern we expect will continue within a rising trading range – at least until a price well above the $1300 an ounce level is well established. Contributing to support under the market, price-sensitive Asian ...

Gold Bulls: Take Comfort in the Long Term

Last year’s big surprise in the world of gold was the failure of prices to move higher. Even strong physical demand for the metal and election-related uncertainties following Trump’s surprising victory could not underpin a sustainable rise in the price. Instead, expectations of higher interest rates, an appreciating dollar, and record-high equity prices held the yellow metal down. Now, it seems gold may have finally turned a corner . . . with prices for the yellow metal beginning their long march upward, a long march that will eventually carry the metal to new historic highs. But, even ...

Gold: Faulty Expectations

Contrary to expectations, ours and nearly everyone else’s who pay attention to the price of gold, the yellow metal has, since Election Day, shed nearly 15 percent of its value in U.S. dollars. According to the pundits who pay attention to such matters, the election of Donald Trump should have pulled the rug out from under stock prices, hammered the dollar against other major currencies, and propelled gold sharply higher. But once again the pundits have been proven wrong: Stock prices on Wall Street have zoomed to new historic highs and gold has, once again, disappointed. Despite this ...

Flash Crash?

Gold has once again surprised. This time, news from “outside the market” set in motion a chain reaction that knocked gold for a loop. First, the British confirmed the country was withdrawing from the European Union . . . and sooner than most had expected. This triggered an instant devaluation of the British pound and a corresponding rise in the U.S. dollar in world currency markets. Not surprisingly, as the dollar rose, gold took it on the chin, as it most often does when the U.S. currency appreciates. At the same time, contributing to the dollar’s recent appreciation has been a ...

Founding Fathers Liked Gold

To be sure, more than a few of our nation’s Founding Fathers owned gold and silver coins to preserve wealth at a time when paper currency wasn’t worth a Continental. Washington, Adams, Jefferson, Hamilton, Franklin, and Madison, each likely held gold coins as a form of saving and to preserve wealth during years of high inflation. And they all, each and every one of them, while distrustful of paper currency, believed there should be a role for gold in the young nation’s monetary and banking system. Alexander Hamilton, the nation’s first Secretary of the Treasury under President ...

Gold in a Rising Interest Rate Environment

By the time you read this Commentary, chances are the Federal Reserve, America’s central bank, will have announced its decision to raise, if only by a slim quarter-percentage point, its key Fed funds interest rate. This is the rate banks charge one another in the interbank market for short-term funds – and it influences the whole spectrum of interest rates across the economy. A quarter-point may be seem little to speak of . . . but it does represent a significant shift in the direction of U.S. monetary policy, a shift with important implications for equities, bonds, real estate, gold, and ...

Interest Rates, Fed Policy, and the Price of Gold

Traders and investors around the world are placing bets on whether or not the U.S. Federal Reserve, America’s central bank, will soon raise short-term interest rates given the continuing ambiguity in U.S. and global economic indicators and continuing volatility in world financial markets. Some days there seems to be a consensus in the marketplace expecting the Fed will stand pat, leaving short-term interest rates unchanged for a while longer. Other days the consensus seems to expect the Fed will sooner or later nudge rates up a tad, possibly voting to do so as early as next week’s FOMC ...

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 prices will likely remain “range-bound” in the short term, perhaps through midyear or longer, trading mostly between a floor price of $1,175 and a ceiling around $1,225. ...