$1800 Gold Holds As The Fed Says "No Limits"

A few things seem to be maintaining the bid on gold, and they're all fundamental in nature. Perhaps this is one of the reasons many technical analysts keep calling for deeper pullbacks which continually end up being both shallow in price and short in duration?

The question for the technical analysts now would be, has gold confirmed it's a move above $1800?

Regardless, fundamentally speaking, in no particular order:

  • Coronavirus response is still having major impacts on the economy, and uncertainties remain high.
  • The stock market appears to be in a melt-up, leading to the need for a hedge against risk.
  • The Fed Vice Chair assured the financial markets that the Fed will do more and has "no limits".

The number of cases of coronavirus in the US has been growing, and in some states, the number of cases is surging.

This has caused some state Governors to react by delaying or even scaling back the so-called "re-opening". Additionally, international relations remain stressed with travel restrictions and warnings affecting many nations. Suffice to say it is debatable whether the economic recovery has begun, or is still in a state of decline. Either way, gold is a great hedge against this type of uncertainty.

Silver too.

The US stock market continues its relentless rise.

Check out record after record after record in the NASDAQ:

NASDAQ Daily

If it is true that the market is in a state of euphoria, led mainly by newbie retail traders, then arguably the "smart money" would rather not be attempting to short this market, but rather, the smart money would be finding a hedge that's safe. In other words, it is difficult to know exactly when the market euphoria will fade, and, perhaps more importantly, how it will fade, and as such, traders and investors can protect themselves from the downside in the financial markets with a safe have an asset.

Gold and silver are safe-haven assets.

Shockingly, or not, depending on's perspective, the Fed Vice Chair (Richard Clarida) came out with quite the statement yesterday.

From Reuters (bold added for emphasis and commentary):

*****

We have a lot of accommodation in place; there’s more that we can do, there’s more that we will do,” Clarida told CNN International. And while evidence of an economic rebound in May and June was “very welcome,” the Fed is following the course of the virus closely as it will determine the course of the economy, he said.

There is “no limit” on how many bonds the U.S. central bank can buy...

*****

Not only is the Fed going to be doing more stimulus, but there is apparently "no limit" on how many bonds the Fed can buy!

If the Fed keeps its permanent bid in the bond market, generalized with the 10-Year Note's daily chart shown below, the pressure on interest rates will be down:

TNX Daily

Furthermore, it is commonly understood that if there is a crash in the stock market, traders and investors will seek-out the "safety" of the US Bond Market, which further places a bid on bonds, pressuring interest rates even lower as the price of those bonds is bid higher.

Still, the Clarida's words speak to debt monetization, something which cannot be good for the US Dollar:

US Dollar Index

Because debt monetization and currency debasements are one and the same.

Traders and investors seem oblivious to all of this risk out there:

VIX Daily

There has been only one minor spike in "fear" since the stock market began crashing in the second half of February.

And so the bottom line is that it sure looks like we're in the "calm before the storm", and judging by Clarida's words spoken just yesterday, it's a hyperinflationary, currency debasement storm.

And here's the thing about that: You can't print gold.

Or silver.

So smart investors are finding protection from all of this ongoing and incoming "money printing" by turning their fiat money into real money, which can't simply be printed or double-clicked into existence, gold & silver.

The commodities look like they're pricing in all of this monetary inflation:

Copper Daily

Copper has finally clawed its way back to "unch", year-to-date.

Crude oil continues to consolidate at around forty bucks:

Crude Oil Daily

While crude oil's price is barely moving, major destruction is taking place in the US Oil Industry.

Platinum continues to be the odd-ball out when it comes to the precious metals:

 Platinum Daily

Platinum is still down over 10%, year-to-date, but to the smart, willing & able investor, there is tremendous value in platinum which could, arguably, see a quick reversal in price (to the upside) if it is true the precious metals are rallying and platinum needs to play catch-up.

Of course, calling platinum the oddball out does not mean all of the precious metals are performing spectacularly:

Palladium Daily

Palladium is still only barely treading water, year-to-date.

The paper gold-to-silver ratio continues to show a print in the mid-90s:

Gold to Silver Ratio

We may not be talking about the mid-90s for long, however.

Because silver looks poised to make some big moves very soon:

Silver Daily

I say that in part because of the undeniably bullish "golden cross" on silver's daily chart, and I say that in part because $18.50 is now arguably supported.

I also say that in part because, arguably, $1800 gold has been confirmed:

Gold Daily

Certainly, it has been confirmed on a fundamental level.

Thanks for reading,

Paul Eberhart