Although the FED's FOMC lowered rates yesterday, and world growth is on a downtrend, we advocate that gold and silver prices are still likely to fall a little further as equity markets look forward to short term gains and the US dollar remains relatively high to its overseas counter-parts. Join our inner sanctum:
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Today is Thursday 19th September 2019 and we are stating why we should expect $17.50 silver and $1450 gold very soon indeed.
OK we have to point out right at the start of this section, if there is more military infractions with Iran, or the China trade talks fail or some other black swan raises its head geopolitically, then gold and silver prices will rise from current levels and potentially quite sharply – at least 10% and quite possibly more before the end of the year.
However, if a trade deal is struck with China, the Iranian situation cools down and President Trump negotiates a few additional deals with overseas countries, then, we may see a reversal in their price to lower levels, again by up to around 10%, and especially if he is in a position to announce a major infrastructure investment in the US.
The US dollar is still relatively strong compared with other global currencies and yesterday’s move, though perhaps weakening the dollar slightly, was insufficient to weaken it to any great extent. In fact, at the time of writing it stands at 98.3 down just 0.23 points.
So, despite a slight weakening in the dollar, which would normally lead to higher gold and silver prices, despite the FED announcing more rate cuts to come and QE if necessary, and despite the announcements from the OECD and negative China growth predictions, both gold and silver are quite frankly little moved and this is concerning for the precious metals.
It really does appear that gold is struggling with the $1500 level and silver with the $18 level as forays into those territories have resulted in relatively quick reversals.
Traditionally it should be noted, that whilst there are the normal blips up and down around FED decision days, as some traders do not wish to get caught out in either direction, it normally takes a day or two for the dust to settle.
Once this occurs, unless the markets are significantly surprised, the preceding trends are likely to be continued after the interest rate decision is made, and the preceding trend in the precious metals market remains down.
This is why we believe that silver could once again fall back below $17.50 and soon, and gold move closer towards $1450 – though we are still a little more bullish gold than silver at this point, especially if there is going to be a global slowdown worse than anticipated, as this will adversely affect the Industrial use of silver.
Now once again, the preceding caveats apply via-a-vis Iran, China and to a lesser extent North Korea.
That said, and we have said it before, equity markets love low interest rates, and while that rests on the horizon, gold and silver only have the fear trade to fall back on. As for now, there are arguably more attractive returns in the equity market, even though we ourselves would not be buying, as like many of you, we believe the downside potential is greater than the upside potential, even though there could be another 1,000 – 2,000 points left in the Dow to go.
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