Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Catch the Gold Golden Goose

Commodities / Gold and Silver 2014 Jun 25, 2014 - 04:38 PM GMT

By: Investment_U


Sean Brodrick, writes: Gold got goosed two weeks in a row. Last week it shot up $39 an ounce. That came on the heels of a $24 move the previous week. Could gold go higher from here?


I'll show you why.

Blame the Fed

Last week, the Fed signaled that it would stick with a near-zero interest rate policy for a good, long time. This means the Fed will likely continue to keep rates lower despite strong signs that inflation could be around the corner. This disappointed some traders (mostly gold bears) who thought the Fed would start to "normalize" its interest rate policy.

And so that provided the spark for gold's $39 move. But many forget that gold moved the week before the Fed announcement as well. So why'd that happen? The reason is counterintuitive. It's because sentiment got incredibly bearish.

I'll explain: The weekly Commitment of Traders report released by the Commodity Futures Trading Commission showed that the number of speculative shorts in gold was very high. When speculators bet all on one side, it's usually a sign that a bottom has formed, and gold will rebound from there. That's because when everybody turns bearish, there is no one left to sell.

Stoking the Fires of Inflation

And there's another good reason traders are buying gold now. I'm talking about fear of inflation.

Inflation is low - currently 2.1%, according to the Bureau of Labor Statistics. This is actually an uptick from the 1.1% hit in February.

Now, here's the scary news.

There are signs there is more inflation percolating in the system. Just look around you - anyone with eyes can see it. Airline fares are up 17% since February. Home prices have jumped 13.3% since January. Food prices are up a whopping 23% since December, using the Thomson Reuters/Jefferies CRB benchmark.

The biggest inflation risk is in energy prices. Gasoline prices are up 10% since December.

The price of Brent crude, to which the U.S. gasoline price is linked, broke out last week, as you can see in this chart...

This breakout gives us a target of $121. The rule of thumb is that an increase of $10 in the price of Brent crude oil tends to lead to an increase of $0.25 in the price of a gallon gas. And this breakout could mean we'll see the price of Brent crude rise nearly $20 in a little over a year.

So heck yeah, that's inflationary.

This is why traders have suddenly rediscovered gold. They see inflationary forces heating up all around them. They see a Fed that is willing to keep interest rates lower for longer than anyone dreamed possible. They believe this is potentially rocket fuel for inflation. And historically, one of the ways people hedge against inflation is with gold.

Sentiment Remains Incredibly Bearish

Now that we've seen gold jump, the move must already be priced in, right? Nope, I don't think so. The Perennially Wrong Boy's Choir of Wall Street still hates gold. Hates it!

Just weeks ago, French mega-bank Société Générale lowered its gold price target to $850. And it's in good company. Goldman Sachs issued a $1,050 gold target in January and has stuck with it. Moody's has a target of $900. And in April, Morgan Stanley said "Gold won't see $1,300 again."

Oops! Gold closed at $1,314.70 on Friday.

Yet those bearish forecasts are still on the table. Those banks, if they follow their own advice, are racking up losses. Boy, I'd hate to be a gold bear tossing and turning in a flop-sweat right about now. That ruins a good night's sleep. Eventually, they'll have to cover.

Hmm... I wonder what could happen to the price of gold when they do cover?

To the moon, Alice!

Good investing,


Editor's Note: Sean was recently interviewed about the immense investment potential of one man's invention that's creating scores of overnight millionaires. Go here to watch the full interview and find out how his invention could hand you as much as $127,000 each year for 45 years.


Copyright © 1999 - 2014 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email:

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules