Gold Alert: The Captain Has Turned On The Seatbelt Sign
(Kitco News) - April 3 - Ladies and gentleman. The captain has turned on seatbelt sign. Please remain in your seats and brace for a bumpy ride ahead. We have dropped altitude in search of smoother air, but have not been able to find it at this time. Air traffic control has warned us that we are facing a perfect storm including high winds, bends in the jet stream and the aircraft's wake vortex.
The stock market has hit its cruising altitude in recent weeks and has already had to notch down from 40,000 feet to 36,000 feet in search of smoother air. None to be found as of yet. Stock investors should prepare for the "brace" position as a number of event risks could unfold in the weeks ahead to disrupt the bull market.
Here's a look at 3 event risks that lie on the horizon that could send shockwaves through equity markets, and in turn trigger a new bull wave in the gold market.
Treasury Secretary Steven Mnunchin, a former Goldman Sachs banker and then hedge fund manager, understands the catastrophic impact to the United States, the U.S. dollar and our interest rate picture if the U.S. were to default on its debt. However, there are others at the helm, who offer a different view. President Trump during the campaign told Chris Wallace in a Fox News interview that "I would be very, very strong on the debt limit. And I would be asking for a very big pound of flesh if I were the Republicans."
Current Office of Management and Budget Director Mick Mulvaney was part of the "Shutdown Caucus" back in 2013, a group of conservative House Republicans who were willing to walk a hard line on closing the government over a debt ceiling increase.
The Bottom Line
There are a number of geopolitical, economic and political issues looming like black clouds on the horizon. Any one of these risks could open the door to a sharp jump in gold prices. Current levels around $1,250 an ounce could be the lowest that gold trades for the remainder of 2017. The $1,350 an ounce area would be the first target for gold bulls on an upside breakout from the current holding pattern.
Fasten your seatbelt tight, the stock market ride is going to be bumpy ahead and gold will be the beneficiary from that turbulence.