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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 ...

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 ...

Cold War Redux — Good for Gold

For the past year and longer, financial-market expectations of U.S. Federal Reserve interest-rate policies have been the single-most important determinant of day-to-day fluctuations in the price of gold. Indeed, the persistent widespread belief that the Fed would soon start weaning the markets off near-zero interest rates, however wrong, has weighed heavily on gold prices while fueling bubble-like conditions in many other asset markets – most notably equities, long-term bonds, the U.S. dollar, New York apartment prices, collectibles of all sorts, etc. All the while, gold has virtually ...

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 ...

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 demand across the region could be the catalyst to higher prices later this year. While demand throughout the region has been soft for over a year now, most major players we met with expect at least a gradual recovery in gold demand – and, hence, ...

Gold: Stuck in the Mud . . . But For How Long?

A reassessment of economic prospects and Fed policy in the weeks and months ahead could be just the turn of events that will support a springtime recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.   Gold prices have been stuck in the mud, trading in recent weeks mostly between $1,175 and $1,225 an ounce. Unless some “outside-the-market” surprise comes along to push gold one way or the other, the yellow metal could remain range bound for weeks to come. Meanwhile, short-term fluctuations within this $50 an ounce trading range will continue to be ...

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Economic Growth, Fed Policy, and the Price of Gold

From day to day and week to week, short-run fluctuations in the price of gold have, of late, been driven almost entirely by expectations of prospective Federal Reserve monetary policies, particularly with respect to short-term interest rates. In turn, these expectations have been driven by the flow of economic data and the somewhat opaque and contradictory comments by one or another Federal Reserve official. Here’s what’s going on: Signs of an improving economy lead the gold and financial markets to expect the Fed will begin raising interest rates sooner rather than later – a negative ...

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Think Long-Term

Although I expect gold prices to rise sharply by the end of the year, possibly even testing its all-time high near $1924 an ounce, I’m the first to admit that short-term forecasts are highly uncertain. I’m much more confident about the long-term prospects for gold. Indeed, looking out towards the end of the decade and beyond, I believe the metal’s price will rise to a multiple of the currently prevailing price. ...

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