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(Kitco News) – Just when gold seemed to be finding a bottom of about $ 1,700, Federal Reserve Chairman Jerome Powell decided to put a shovel on the market and told investors to start digging.
Gold prices fell sharply below $ 1,700 per ounce late on Thursday after Powell said at the Wall Street Journal’s job fair that he was not too worried about the sell-off in the bond market. He said the central bank needed more than just a rise in bond yields to adjust its monetary policy. While the rise in the rate of return caught his attention, he said that monetary policy is not based on one number.
“I would be concerned about financial market disorder or unwanted tightening. It is not about one specific price,” he said.
Powell’s comments boosted bond yields to a one-year high above 1.6%. Over the weekend, the return on 10-year notes is still higher than 1.5%.
The question that many investors and players in the market have been asking is at what point is the Federal Reserve raising the yields on bond issues, which rose by more than 200% in August. The answer the market is still getting from Powell is ‘soon’.
To cut a long story short, thunderstorms will still be brewing over the gold market, as bond yields could continue to rise unnoticed. According to some analysts, if gold cannot support at $ 1,680, we could see significantly lower prices with potentially $ 1,600 as an imminent target.
“Wherever the highest returns are, it will be the bottom for gold,” Phillip Streible, chief line strategist at Blue Line Futures, told Kitco News in a statement on Friday.
Although there is a negative sentiment in the market in the short term, many investors are not yet ready to give up gold in the long term. Although most people are focused on the growing potential for a strong economic recovery, the inflation threat continues to grow.
Gold’s price action has been weak lately. However, the broader commodity market is on fire, with everything from grains to wood to base metals having unprecedented rallies. For many analysts, these higher prices could trigger a tidal wave of inflation that could cause gold prices to rise higher.
“Historically, gold underperformed for a commodity-led reflection period in the first six months, but generally fared better in the next six to 36 months,” said World Gold Council analysts in a report published earlier this week.
While so much is going on in the financial markets, the ongoing debate between gold and cryptocurrencies feels like a byproduct that completely ignores the bigger event.
This week, billionaire investor Mark Cuban jumped into the debate and spearheaded it with bitcoin critic Peter Schiff on Twitter. Cuban declared: ‘Gold is dead Peter. Goes on.’
Schiff, however, shot back, saying bitcoin is a “waste of energy.”
I personally think this debate is a waste of time, because in the end, the two assets do exactly the same thing. Bitcoin and gold are hedges used to protect investors from global currency depreciation in an environment of rising inflation.
With that I’m going to allow famous investors Frank Giustra has the final say in this dispute.
“Both @mcuban and @PeterSchiff are being deceived. Bitcoin is here to stay anyway. Gold is far from dead. Stop fighting each other. All #BTC fans, gold is the least of your worries. You there will be real fighting with governments, CBs, ‘he said on Twitter.
Disclaimer: The views expressed in this article are those of the author and may not reflect the views expressed Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, not Kitco Metals Inc. or the author cannot guarantee such accuracy. This article is for informational purposes only. It is not a request to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept the blame for losses and / or damages arising from the use of this publication.