I was at dinner recently with some “well-connected” people in Beijing. The primary question everyone wanted answered was, “Where is gold going?” I said there is some near-term risk of weakness – but it will be a fresh buying opportunity for medium- to long-term investors and traders, notes Eoin Treacy, editor of Fuller Treacy Money.
The event was a community affair for friends and neighbors in a gated community. We shared a meal of swimmer crabs, pork shoulder, pigs’ trotters, and several types of vegetable. It was washed down with plenty of Moutai – which was primarily aimed at loosening my tongue.
Spot Gold
The gold question was not particularly surprising. China is the world’s largest market for physical gold. It is also a major producer. Since the property market is still in a downtrend, and the stock market is trendless, investors have a clear incentive to pay attention to gold.
The answer I gave will be familiar to subscribers. And sure enough, gold has been weak over the last several days. However, I remain of the view that $4,000 is an important area of support and will be viewed by traders as an attractive entry point.
What is going on? When central bankers threaten to do their jobs, that removes some of the support for gold. That is what happened last Friday.
The challenge is that raising rates could threaten to prick the AI bubble and the ensuing recession would only mean central bankers would need to cut rates again. That’s a good reason for being shy about hiking too aggressively, even if inflation has been above target for five years in a row.
