Gold has been stabilising and attempting to rally in recent weeks, but keeps getting dragged back down in the volatility surrounding inflation and the outlook for the Fed Funds Rate. Which I expect to peak in the 5.75% to 6.5% range. Perhaps as high as 7.5%.
The repercussions for the US economy will be severe. The realisation of just how bad things will be in 2023, both for the USA and other western economies in particular is beginning to dawn on people.
As a result, stocks have just turned down yet again.
For the moment, Gold is caught up in this general deleveraging and fleeing from risk. This may remain the case momentarily, but within days, certainly weeks, I would expect Gold to stabilise. Even against a strengthening US dollar.
The modern pattern has been, that in times of crisis, and this will be a period of on-going economic crisis, people first run to the US dollar as their safe-haven. This is questionable in today’s more balanced world, but most investors still favour the Greenback at first.
As the uncertainty grows however, there is a tipping point where Gold suddenly returns to favour. The ultimate safe-haven. It is likely this will be the case again. We have already seen waves of this through 2022, but not in a sustained way.
2023 is likely to be tougher economically, than 2022 has been.
Very soon, people will begin to position for the next great Gold safe-haven trade. It is likely to stabilise during strong US dollar phases, while catapulting higher on any US dollar weakness.
The big trade though, is to recognise that the US dollar is now turning into perhaps the biggest bubble of all time. It can grow further, but it must eventually burst as the economy heads for negative growth again, almost immediately.
When this happens, Gold should easily surpass $2,023 in 2 023. The potential target for next year is all the way back to US$2,500.