Gold Breaks Record but Will Face “Crisis Moment”
Strap in. Things are about to get wild for gold.
The price of gold opened this morning, smashing through all-time price records, topping over $1,940 an ounce.
But the party is just getting started.
And on Wednesday at 2 p.m., gold may face its biggest moment in four decades.
Gold's Crisis Moment
Gold is facing a crisis moment. And I mean that in the most literal way possible.
Most often people use the word “crisis” to mean a troublesome or difficult time. But the word originally derives from the Greek word “krisis,” which was a medical term meaning the turning point in a disease — it's the moment that decides recovery or death.
But gold isn't sick, and it can't die. It's really a turning point for gold's market — the deciding moment whether investors decide they're going toThere's little doubt what the Fed will do. It's ng to keep rates at 0%–0.25%. buy up gold to several thousand dollars an ounce or the rally that's taken prices to record highs fizzles out.
Gold's crisis moment is Wednesday at around 2 p.m.
That's when the Federal Reserve announces its next decision on interest rates.
This morning's run-up in prices is a clear indication that investors are positioning themselves ahead of Wednesday's meeting. That's not uncommon.
Even in normal times without mass media attention due to record prices and economic uncertianity, investors use Fed rate meetings to trade gold.
But gold prices are getting heavy attention at record highs. And these aren't normal times.
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Based on federal fund futures prices, the probability of the Federal Reserve keeping interest rates where they are today (0%–0.25%) is being calculated at 100%. In fact, the probability of the Fed holding rates at 0%–0.25% through March 2021 is being calculated at 100% right now.
Here's what I expect from gold this week...
Today: Gold prices remain high throughout the day trading over record highs, maybe slipping near the closing bell.
Tomorrow: Gold sells off a bit on profit-taking, maybe dipping below $1,900 an ounce. Someone at Forbes writes gold was a sucker's rally.
Wednesday morning: Gold prices shoot back up over record prices right ahead of the Fed announcement.
Wednesday 2 p.m.: The Crisis Moment.
There's little doubt what the Fed will do. It's going to keep rates at 0%–0.25%.
But what will investors do?There's little doubt what the Fed will do. It's ng to keep rates at 0%–0.25%.
That's the big question.
Their decision will very likely be the turning point for gold prices.
As I said, it's not uncommon for investors to position themselves in gold ahead of a Fed rate meeting. We've seen it many times before, both when the Fed was expected to increase and decrease rates. Typically, gold prices will increase ahead of a Fed meeting and then immediately drop following the official announcement at around 2 p.m. So if we see gold prices drop following the Fed's announcement this week, it won't be anything special.
However, a significant boost in gold following the announcement could be the spark on the fuse on the final retail mania stage of the gold bull market that skyrockets prices to unreasonable levels.
And we think the probability of that happening is high.
Watch gold carefully this week. You'll likely be watching history.
To learn more about the stages of a gold bull market and exactly where we are in it, check out a recent article I published in Energy and Capital here.
Until next time, As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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