- The gold market continues to rise overall, as the US dollar weakness continues to favor a rising metals market. That being said, we are still waiting for the Fed.
Gold
The gold market continues to scream higher during the trading session on Wednesday despite the fact that the Federal Reserve has an interest rate announcement and statement coming out shortly after Europeans go home. The general sentiment right now is that the US dollar is starting to weaken significantly as it has hit 4-year lows, trying to digest a shift in the Trump administration's rhetoric towards a weak dollar policy to boost export competitiveness.
Risk sentiment is highly bifurcated though, as safe haven flows are flooding into gold and the Swiss franc while other markets don't seem to be as affected. The market right now though for gold is one that is just simply a momentum machine, like we have seen in silver, and gold seems like it is trying to replicate what we are seeing in the silver metals market.
Market Drivers and Sentiment
The primary driver here is a triple threat with the US dollar slumping as the administration is favoring a weak currency, heightened geopolitical uncertainty, and market fears of a US debt sustainability crisis. I suspect that the third option out of those 3 is probably the first one to be thrown out the window though because quite frankly, that's something that pops up every 6 months and has for the last 30 years.
This move out of treasuries and into bullion has effectively broken the traditional inverse correlation between yields and gold, but again, this is probably a short-term move. Regardless of what happens, gold looks like it is a market that you would be a buyer of under almost all circumstances, and after the FOMC meeting, we may have even more clarity as to how expensive gold could get. Short-term pullbacks all the way down to $5,000 remain buying opportunities.
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