Strong Buy: Gold Set to Explode in 2018 wrote on Friday:

‘Sentiment in the gold market appears to be shifting as prices hold on to critical support at $1,300 an ounce, bouncing off fresh five-month lows at the start of the week.

However, some analysts are not convinced that the yellow metal has found its bottom just yet as the market remains in a downtrend. Despite the push higher, prices have been unable to break above essential resistance points, ahead of next week’s shortened trading week.

‘Gold is ending the week with solid positive gains as markets digest the minutes from the May Federal Reserve’s monetary policy meeting, which showed that committee members support inflation moving past their 2% target in the near-term.’

Have you noticed that when gold drops sharply, ‘experts’ suddenly turn bearish? It’s the same story when gold bursts higher. The majority assume the current trend in motion will stay in motion.

It couldn’t be further from the truth.

I’ll explain…

Higher rates are good news for gold

For months I have warned that US interest rates will rise four times this year. I’m shocked the market has been slow to catch up! Despite the market’s bearish reaction to the hawkish Fed, I believe things will change soon. History shows that higher interest rates are actually good news for gold.

Take a look at the chart below:

Baby Bull

Source: Gold & Commodities Stock Trader
[Click to enlarge]

I showed this chart during my Paradox of Prosperity presentation in Melbourne this year. It shows that, every time since December 2015, US interest rate hikes have formed a new higher low.

That’s a technically bullish pattern.

Historically speaking, gold always — without failure — falls into the US Federal Reserve meeting. Traders buy US dollars anticipating higher rates, putting pressure on gold. When interest rates rise, they tend to close their positions and take profits.

It comes down to expectations …

The market has expected three rate rises this year. But it’s now waking up to the prospect of four.

Most mainstream ‘analysts’ believe that’s bad news for gold. But they are wrong. Remember, higher interest rates have supported the gold price since 2015.

Drawing a simple correlation of the gold price and interest rate increases — like I did on the chart above — would light up most people’s eyes. I’m shocked why most people don’t do any basic analysis. If the US Federal Reserve increases interest rates another three times this year, gold could skyrocket.

If you have followed my work, you will know that I used to be bearish, from 2012. But the truth is, the story for gold has changed for the best this year. The market expects the institution to raise interest rates next month and in September. I believe we could see another rate increase in November as well. In other words, the interest rate story ALONE supports my view that gold will break out into a bull market later this year.

Read This BEFORE You Buy Gold: Exclusive dossier outlines why gold bullion and precious metals could be the most important investment you’ll ever make. Download now (free)

Now is the time to buy gold added more to the story last month:

Rising yields, a stronger dollar and sliding stocks are fast becoming a familiar and uncomfortable cocktail for investors. Now violence in the Middle East, the U.S.-China trade spat, uncertainty on Italy’s government and global growth concerns are helping cement the prevailing sentiment.

Markets don’t know where to look, they don’t know where to focus,” said Samantha Azzarello, global market strategist for JPMorgan ETFs, said in an interview at Bloomberg’s New York headquarters.

It’s odd — rates are going up and we’re late cycle, and then volatility is back after volatility being so low, almost painfully low. And then I think clouds of uncertainty coming from Washington and geopolitics lays on top of all of it.”’

Samantha Azzarello, global market strategist for JPMorgan ETFs, has hit the nail on the head. Uncertainty hasn’t gone away…it’s got worse! That’s the breeding ground necessary for higher gold prices, historically speaking. Remember, the yellow metal is a hedge against the confidence in the financial system.

It’s also a hedge against the prospect of war. That’s why you should pay attention to what’s happening in the Middle East. A major war could break out at any time between Israel and Iran.

Technically and fundamentally speaking, absolutely nothing has changed for gold. It’s not in a bull market yet. But that could change in the second half of the year, if my analysis is correct.

The bottom line: Gold has been a terrible investment for years. But now is the time to buy your favourite gold stocks on any weakness — especially if there’s any end of financial year tax selling into 1 July.


Jason Stevenson,

Resources Analyst, Gold & Commodities Stock Trader

Read This BEFORE You Buy Gold: Exclusive dossier outlines why gold bullion and precious metals could be the most important investment you’ll ever make. Download now (free)

Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money