The reason why gold in our opinion has been holding up well despite the mentioned headwinds which also includes the rising opportunity cost of holding a non-interest paying investment like the yellow metal, is likely to be a market in search for a hedge against the FOMC failing to deliver a soft, as opposed to a hard landing. In a recent article in the WSJ, titled “Why a soft landing could prove elusive” Nick Timiraos, the reporter known as the Fed whisper, writes about how almost every hard landing looks at first like a soft landing. He also highlights four developments standing in the way of a soft landing now:
- The Fed staying too high for too long
- A too-hot economy
- A rise in oil prices
- A financial market rupture
Quite poetically he ends by saying “Planes land. Economies don’t”
Demand for gold as a hedge against a soft-landing failure is unlikely to go away as the outlook for the US economic outlook in the months ahead looks increasingly challenged. With that in mind, we maintain a patiently bullish view on gold and with that also silver and platinum, and we see the yellow metal eventually reaching a fresh record. However, the timing for a fresh push to the upside will remain very US economic data dependent as we wait for the FOMC to turn its focus from rate hikes to cuts, and during this time, as seen during the past quarter, we are likely to see continued choppy trade action.