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(Kitco News) – Just when it looked like gold was finding a bottom around $ 1,700, Federal Reserve Chairman Jerome Powell decided to throw a shovel into the market and told investors to start digging.
Gold prices fell solidly below $ 1,700 an ounce on Thursday night after Powell, speaking at the Wall Street Journal Jobs Summit, said he was not too concerned about liquidation in the bond market. He said it would take more than just an increase in bond yields for the central bank to adjust its monetary policy. Although the increase in bond yields attracted his attention, he said that monetary policy is not based on a number.
“I would be concerned about a financial market disorder or an unwanted tightening. This is not a particular price,” he said.
Powell’s comments pushed bond yields to a one-year high, up 1.6%. At the weekend, the yields of 10-year notes are still at high levels, above 1.5%.
The question that many investors and market participants have been asking is how far the Federal Reserve jumps in savings bond yields, which have increased by more than 200% from August lows. The answer that the market continues to receive from Powell is “not so soon”.
To make a long story short, storm clouds will continue to hover over the gold market, as bond yields may continue to rise unchecked. According to some analysts, if gold cannot support gold at $ 1,680, we could see significantly lower prices with potentially $ 1,600 as an imminent target.
“Wherever the top in yield is, it will be the bottom in gold,” said Phillip Streible, chief market strategist at Blue Line Futures, in a commentary to Kitco News, Friday.
Although there is a clear negative sentiment in the market in the short term, many investors are not ready to give up gold in the long run. Although most people are focused on the growth potential for a strong economic recovery, the threat of inflation continues to grow.
Gold price action has been weak lately. However, the broader commodity market is on fire, with an unprecedented rise in everything from grains to wood and base metals. For many analysts, these higher prices could trigger a wave of inflation that could drive up gold prices.
“Historically, gold has tended to outperform the commodity-led reflective period in the first six months, but has generally outperformed in the next six to 36 months,” said World Gold Council analysts in a report published earlier this week.
With so much going on in the financial markets, the ongoing debate between gold and cryptocurrencies seems like a separate show that completely ignores the bigger event.
This week, billionaire investor Mark Cuban entered the debate and fought bitcoin critic Peter Schiff on Twitter. Cuban declared, “Gold is dead, Peter. Go ahead.”
However, Schiff countered, saying bitcoin was “a waste of energy”.
Personally, I think this debate is a waste of time because, ultimately, the two assets are doing exactly the same thing. Bitcoin and gold are hedges used to protect investors from the devaluation of the global currency in an environment of rising inflation.
With that, I will leave the famous investor Frank Giustra has the final say in this dispute.
“Both @mcuban and @PeterSchiff are wrong. Bitcoin is here to stay, for a while at least. Gold is far from dying. Stop fighting each other. All #BTC fans, gold is the last of your concerns. Your real battle will be with governments, CB’s, ”he said on Twitter.
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