Opinion with Peter Hug
Gold Price Testing Resistance
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Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - Trading gold’s range over the past few sessions has worked well for traders, entering longs around $1,265 and selling at $1,282. The bears have tried to collapse the price based on the fundamental argument that higher rates in 2018, with expectations of four Fed hikes and a growing U.S. economy helped through tax cuts on the corporate side, would catapult the dollar higher and be the death bell for gold. This may come to pass, but the resilience of gold in the face of this fundamental argument cannot be ignored. Geopolitical risks remain high. It is unlikely that the Fed will be as aggressive as suggested, since debt servicing would expand exponentially. Suggestions that tax reform may be delayed and no other signs of fiscal stimulus will also curb the Fed’s aggressive jargon. President Trump, influenced by Treasury Secretary Mnuchin, will likely lean towards more dovish Fed appointees to maintain the current momentum of the recovery. By all measures the equity markets are overvalued. Not a scenario that suggests investors should be throwing away their gold hedge. This is a time to hold insurance. If gold collapses because the fundamental argument wins out, the balance of your portfolio should continue to perform well.