We discussed gold late last year, recall?
It all began with a Bloomberg article highlighting the significant trend of Central Banks buying gold in anticipation of the Federal Reserve shifting interest rate policy.
Last week, Chairman Jerome Powell hinted at the upcoming pivot, setting the stage for gold’s next breakout.
However, it’s not just the Fed influencing gold prices.
Geopolitical concerns, upcoming U.S. elections, and fears of inflation are driving a broader range of buyers, including Main Street investors, towards gold as a reliable hedge.
Recent events reflect this shift.
Following the passage of a spending bill, a group of House Republicans vowed swift retaliation, potentially endangering another Speaker’s position.
Investors are growing weary of political risks in the market and turning to gold as a safe haven.
Consider Costco (COST), which began selling gold bars late last year and quickly sold over $100 million worth, with demand so high that new inventory sold out rapidly.
The company is now offering silver coins, further cementing its appeal as a hedge against inflation and Fed policies.
While silver prices also show potential for a rally, the focus remains on gold for now.
Interest rates will be a key factor in driving gold prices higher in the long term.
The Fed’s previous shift to lower interest rates in 2007 led to a significant increase in the price of the SPDR Gold Shares (GLD).
Considering the current economic climate, along with geopolitical uncertainty, the outlook for gold remains positive.
After a recent consolidation phase, gold is poised for another 5-10% increase in value, with strong support at $200 for GLD shares ($2,200 for physical gold).
As the election approaches, demand for gold is expected to rise even further.
Political volatility and the potential leadership changes in the government are driving investors towards long-term hedges like gold.
Bottom Line
Aim for a 20% increase in gold and GLD shares as the market anticipates potential unrest surrounding the election.
Additionally, the Federal Reserve’s interest rate adjustments will further fuel the rally in gold prices.
For the next two years, this simple hedge could prove to be a valuable addition to any portfolio.
About the Author
Chris Johnson (“CJ”), an experienced equity and options analyst, brings nearly 30 years of expertise in quantifying investor sentiment on Wall Street. Known for his technical and contrarian trading style, he navigates the markets effectively.
