It looks like gold’s about to stop teasing us. Big numbers like the $2,000 level can act as a magnet of sorts for the gold price — a target that essentially becomes a self-fulfilling prophecy, notes Brien Lundin, editor of Gold Newsletter.
As you can see from the following chart, the yellow metal has been pulled toward that key benchmark a couple of times over the past week or so, only to just barely fail to close above it.
Note that this chart tracks the current active futures contract in gold. It seems that gold is about to stop teasing us and once again clear $2,000. And from that point, the next big target will be the all-time high.
After all, there are some important fundamentals driving the price higher right now. The ISM manufacturing index for March was a significant miss. It came in at 46.3, far lower than the consensus expectation of 47.5 and down from the previous month’s 47.7.
This shows that the economy is slowing as the Fed had hoped, and it fuels the market’s hopes that Powell & Co. will pause on their rate-hike crusade.
But there was a more important input Sunday: A group of oil producers led by Saudi Arabia made a stunning announcement of a million-barrel/day output cut, beginning next month.
The bottom line of all of this: The Fed is more likely to pause...just as oil prices will begin to rise again, fueling higher inflation.
As you know, I’ve been predicting that the Fed would pause without having gotten inflation near its 2% target, with the level more likely to remain stubbornly in the 4%-5% range. This, I argued, would be very bullish for gold and silver.
However, with oil prices surging now on this surprise production cut, I wouldn’t be surprised if the inflation rate begins to head higher once again. Nor would I be surprised if this new dynamic pushes spot gold far beyond the previous record high of $2,063 in the weeks just ahead.
So hang on — it’s about to get very interesting.