Gold Pausing Before Lift Off
Gold prices hitting a 3-month low
Recently, Colin Shah, MD, Kama Jewelry submitted, “Gold prices were trading with mixed cues till the Fed announced its monetary policy on June 14. The Fed holding rates were very much on expected lines, but the commentary indicated at least 2 more rate hikes in the current cycle.
This led to a rise in the dollar index to near 103 level thereby making it expensive to buy gold. Gold prices have hit a 3-month low internationally and a 2-month low domestically. Despite the fall, gold has posted more than 7% returns YTD in INR terms.
Moving forward, we expect gold prices to be stable, a recession – mild or strong in the US may lead to US Fed softening its stance, thereby pushing up the gold prices. Gold prices are likely to find support at $1,930 (Internationally) and INR 58,500 (Domestic market)”
Rob McEwen, the chairman of McEwen Mining also learned that gold has fallen from the heights it saw earlier this year, staying below US$2,000 per ounce so far in June! Is the yellow metal just taking a breather before it moves higher? Rob McEwen believes the answer is “yes.”
While discussions around potential declines in interest rates and inflation have diverted some attention from gold, McEwen said the burden of government and corporate debt remains massive.
“And then the monetary stimulation. There’s still the world awash in liquidity, and people go, ‘Well, where do I put my money?’ You’re seeing central banks and a lot of them are part of the BRICS group that Russia and China have been putting together; they have been buying gold, and they’ve been buying it with the dollars they held in their reserves. I think you’re going to see more of that happening. There’s going to be more turbulence in the currency market as we go forward,” he said.
Discussions around de-dollarization have intensified in recent months, and McEwen said gold will benefit as the American currency falls from favor. He sees China and Russia spearheading that transition as they work to transact in Yuan and rubles.
“People are going, ‘Well, why am I holding onto dollars if I can use other currencies? I’ll just step away from that.’ That’s what you’re seeing. I think it’s going to take some time, because neither of those currencies have the liquidity that the dollar has, but there’s a definite move that way,” said McEwen, adding that he sees gold gaining further traction as a neutral store of value.
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