The debt monetization trade fades
The big risk in the gold trade next week is that the Federal Reserve highlights that the economy hasn’t been as bad as feared and hints that it will ease up in the stimulus.
That would further push up Treasury yields and dampen the short-term demand for safety.
At the same time, the low-rate and fiscal spending story isn’t going to go away. This decade is going to be an era of debt monetization and gold will shine as currencies fall.
For now though, that’s simply not the exciting trade and investors are comparing gold to the scores of company stocks that are jumping double-digits daily.
Technically, the May low of $1677 is support at the moment and holding it is critical to maintain the series of higher lows on the chart. A break could easily spark a decline to $1650 and below. Even with a bit of support, I don’t think there’s a great case to buy here. However a dip to $1600 would be enticing.