Throughout much of this year, the price of gold had been hanging around $3,500 per ounce, occasionally peeking its head above the vaunted price level while failing to surpass it in any meaningful way.
That changed at the end of August, when the gold futures price once again powered above $3,500 – and, this time, rode the latest burst of momentum past $3,600 for the first time ever.
For many analysts, gold’s forceful breaching of what had proved to be a rather stubborn level of price resistance in the shorter term has effectively confirmed what they already “knew” intuitively: that the gold bull – along with the comprehensive uncertainty feeding it – remain very much intact.
And that the $4,000 price target many have eyed for some time remains a sound, viable projection.
“Investors Have Not Missed the Boat”
“We have been waiting for a spark to ignite gold, and when we look back, we will see that this was the time,” Michele Schneider, chief strategist at MarketGauge.com, recently said. “From a technical perspective, the longer a consolidation phase persists, the stronger the breakout move is likely to be.”
“I would say $3,800 to $4,000 is extremely practical, without getting too hyperbolic,” she added. “That would probably be my next legitimate target before we might see some profit-taking. Even at these prices, investors have not missed the boat. When investors start buying the strength – buying on these important breakouts – that’s when parabolic moves happen.”
Although Schneider believes there’s a multitude of drivers fueling the uncertainty which lies at the heart of gold’s upward momentum, she suggests the Fed’s apparent shift to prioritizing labor-market concerns over current inflation could be the spark which pushes the metal the rest of the way to $4,000.
In fact, since Fed Chair Jay Powell aired his unexpectedly dovish take on monetary policy at Jackson Hole, traders’ expectations of a September rate cut have surged from a little more than 70% to nearly 100%.
Schneider: Gold’s Surging Over “a General Lack of Faith” the Fed Will Keep Fighting Inflation
“ What we’re seeing is that there’s just a general lack of faith that the Fed is going to do what it needs to do, that the government knows what it’s doing,” Schneider said, referring to the growing likelihood the central bank will resume rate reductions in spite of ongoing price pressures. “ There’s this flight into gold because there are worries all over the place about fiat currency.”
Indeed, while rate cuts are known to strengthen gold by lowering the opportunity cost of holding the metal, it’s really the potential fiscal implications associated with cutting rates in the face of higher inflation that are poised to send the metal soaring from here.
As another respected strategist, Aakash Doshi of State Street Investment Management, recently told ABC News:
“The Fed is cutting because of a weak labor market but inflation is still elevated. That supports alternative fiat assets like gold.”
Whether gold reaches $4,000 in relatively short order remains to be seen. But if it doesn’t, neither should anyone reasonably expect it to lose much ground, given both the number and potency of the metals-favorable catalysts in play right now.
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