Loading ...More broadly, where does the price of gold go from here?
The most important signal is that gold’s uptrend, which began on Dec. 15, 2016, remains intact. Even after the flash crash, gold remains just a bit below the previous low of $1,210 per ounce on May 10, 2017. That means gold is set for a rally above $1,300 per ounce, which would exceed the prior high of $1,293 per ounce on June 6.
The next powerful indication is the marked slowing of the U.S. economy in reaction to rate tightening by the Fed. This is showing up in auto sales, retail sales, disinflation, lower labor force participation and many other indicators.
The result of this slowing will be that the Fed will have to reverse course and use “forward guidance” to signal that they will not hike rates in September. That’s a form of ease that will lower the dollar index and raise the dollar price of gold.
Finally, investors can take comfort from the fact that all manipulations fail in the long run. Whether it’s the “gold corner” of 1869, the “gold pool” of 1968, Kissinger’s secret “gold dump” of the late 1970s, or “Brown’s bottom” (when the U.K. sold most of its gold at 30-year low prices) of 1999, or the more recent gold games on the Comex, all manipulations fail. Gold prices always find their way higher, because paper currencies always lose value over time.
The key response functions to manipulation are patience, confidence in the long-run path of gold and nimbleness in stepping up to buy gold at interim lows when manipulation gets out of hand, as it just did.
The gold rally that began on Dec. 15, 2016, is poised to continue despite the trauma of the flash crash. The crash represents a gift to investors. We now have a better entry point for what will still be much higher gold prices later this year.
FROM ADAM HAMILTON–“ZEAL”=
While gold stocks are mired in universal bearishness in the summer doldrums, that’s the time to buy low ahead of their powerful autumn, winter, and spring rallies. It’s never easy fighting the herd to deploy into an out-of-favor sector, but that’s the only time stock prices are on sale. The opportunity to ride a parade of major 11.2%, 15.4%, and 14.0% seasonal rallies between now and next spring is unparalleled in all the markets