Although the gold market may be seeing some weakness to begin the new trading week, the yellow metal is likely just seeing some profit taking after prices hit a one month high. We have seen this song and dance before, where gold sees some moderate selling ahead of an interest rate hike only to move higher following the hike.
We expect this time around to be no different, as the Fed appears ready to pull the trigger on another rate hike in mid-June. The gold market appears to have bigger fish to fry, and the idea of another 25 basis point rate hike is not likely to scare investors away.
In fact, gold could be setting up for a major run higher, and a number of issues are aligning that could fuel a big increase in demand for the yellow metal. What may cause the next big move in gold that could see prices breach the recent trading range? There are numerous factors that could potentially influence the price of gold, but three of the biggest we think are worth paying attention to right now are:
Dollar weakness: The greenback has reversed course, and the three month old downtrend has seen the currency erase all of the gains made since the Presidential election. Although a more hawkish-sounding Fed could potentially boost the greenback, we expect the fed to remain more on the dovish side of the ledger. This could keep the currency weak and lend significant support to gold and other dollar-denominated assets.
Recession: From a historical perspective, the U.S. will quite possibly enter recession sometime in the near future. This should come as no surprise following the multi-year economic expansion and lofty stock market levels. The risk of recession could keep interest rates low for a long time to come, and low rates may in turn keep the dollar weak. The stock market is a whole nother story, and could potentially enter a protracted bear market once the economy begins hitting significant bumps again.
Geopolitics: The geopolitical landscape is certainly an area of concern. Over the weekend, North Korea launched another missile test in direct defiance of the U.S. and its neighbors. President Trump acknowledges the seriousness of the situation, and has vowed to deal with it. Unfortunately, diplomatic channels have thus far failed to stop North Korea from pursuing its nuclear program, and the likelihood of some type of military action seems to be increasing.
All of these issues could potentially send investors fleeing from stocks and risk assets. Much of that investment capital could then potentially find its way into gold, silver and other perceived safe haven assets.
If you do not currently have an allocation in physical precious metals, now may be the ideal time to consider one. Doing so has never been easier.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold and silver ownership. Our precious metals professionals are here to answer your questions, and can even show you how easy it is to use your IRA to buy and hold real, physical metals.
Don’t wait for the next major stock market collapse or economic crises before taking action. Explore your options for physical gold and silver ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, demand, geopolitical issues, gold, recession, weak dollar