With the Fed continuing to ramp down its QE programme, a bearish technical set up, and a lack of CPI inflation, the outlook for gold is bearish, and therefore gold is still likely to go to $1,000 before it goes to $2,000.
In December last year I outlined a number of factors that were bullish for US stocks, and said that they would continue to be the primary beneficiary of Fed policy and other favourable macro forces. My bullish outlook has not changed, and this article explores more reasons to be bullish on large-cap US equities.
While the Fed’s taper talk has been tapered and then un-tapered, the market may now be tapering the Fed rather than vice versa. Let’s assess Act 2 of the taper talk and the implications for the markets, including the dollar and gold.
Wholesale gold edged back from last week’s two-month closing high on Monday morning, recording its best London Gold Fix since 18th June above $1375 per ounce. World stock markets slipped, with Indonesia dropping 5.5%, as major government bond prices also fell, driving interest rates higher.
In normal times, today’s combination of record low interest rates and massive infusions of capital into the banking system would ignite the mother of all expansions. That it hasn’t has confused the economists whose textbooks clearly state that it should. And it has convinced the Fed to just keep upping the ante with QE after QE.
The Fed knows that the US economic recovery remains very fragile which is why it has completely backtracked on talk of reducing its asset purchases. The fact is QE will go on until the market, not government, puts a stop to it.
The price of wholesale gold fell back to $1320 per ounce Wednesday lunchtime in London as new data showed the US economy expanding faster-than-expected. Second quarter GDP rose 1.7% in real terms from a year earlier, the Bureau of Economic Analysis said.
Gold is up, even getting a positive mention in Barron’s. Is it Japan’s election or the tapering of the taper talk that’s driving gold higher of late? Is this a bounce or the beginning of a new major uptrend in gold?
Both silver and gold slipped in London on Friday morning, edging down to $1271 per ounce and $19.80 respectively. European equities pushed higher while the US Dollar rallied and major government bond prices rose.
The dollar price of gold dropped $20 per ounce lunchtime Friday in London, briefly dropping through $1220 per ounce after the release of June’s US non-farm payrolls data. Non-farm payrolls growth came in at 195,000 against consensus forecasts of 165,000.
The price of gold rose in Asia and jumped at the start of London trade Tuesday, hitting $1267 per ounce to recover 40% of last month’s crash before easing back. Prices for silver bullion also rose, but lagged gold’s rate of gain, before slipping back below last week’s finish at $19.69 per ounce.