What’s happening in gold
Gold is at the highs of the day, up $11 to $1713 as the US dollar weakens across the board. The 0.6% rise boosts gold to the highest since Friday but in the big picture, the consoldation around $1700 continues.
The chart appears to be a bull flag but the idea here is to go with a break in either direction.
The fundamentals for gold are great but I worry about another downdraft if risk assets take a hit. Powell today is a big risk. There has been talk about negative rates and other Fed members have been trying to stamp that out but I worry the market has priced in a chance of it and that Powell will have to stamp it out.
The only way we don’t end up with more deflation is because localizing
global supply chains, stagnant productivity and a higher government
presence in the economy will impinge upon the aggregate supply curve. In
fact, if you have a three- to five-year view, a strong case can be made
that stagflation is going to emerge as a new secular theme once demand
conditions stabilize. Either way, gold comes out a winner, and is my
highest conviction call, if for no other reason than supply growth is
pretty constant at about 1 per cent a year, whereas the production of
the money supply right now is running at 30 per cent.
He joins Druckenmiller and Tudor Jones among others who are banging the drum for gold.