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Time Stamp
Prices as of 10.00 a.m. EDT Comex 16 June 2022 $1,830.80 (Basis the August 2022 Comex Contract).
Recommendation: Sell
Initial Target Price / Range: $1,810
Initial Timeframe: 16 June 2022 to 24 June 2022
The Fed raised interest rates by 75 basis points at its June Federal Open Market Committee (FOMC) meeting and has left the door open to another 75 basis points or at least 50 basis points increase at its next meeting in July. Real rates have risen and 2-year breakeven inflation figures have declined in response to the Fed's actions.
Gold has been holding up well despite the Fed's hawkish tone and an increase in real interest rates. This can at least in part be explained by weakness in the U.S. dollar and stock markets indices, many of which have fallen to 52-week lows.
Additionally, there have been some concrns about a potential recession as a result of the aggressive monetary tightening that the Fed has embarked upon. The increase in rates needs to be put in perspective. While the Fed has been raising rates aggressively they are being raised from extremely low levels and nominal federal fund rates of roughly 3.5% at the end of 2022 do not seem sufficiently high enough to toss the U.S. economy into recession.
Weakness in the U.S. dollar, meanwhile, seems to be the case of ‘buy the rumor, sell the news'. Ahead of the FOMC meeting, the trade-weighted U.S. dollar had risen to its highest level since April 2020. While the dollar has softened some since the FOMC meeting it still is at elevated levels and there is potential for the dollar to continue rising given the relative strength of the U.S. economy compared to other major economies.
A combination of higher real rates and a stronger U.S. dollar is expected to act as a headwind to gold prices in the near term. This is expected to, at least initially, take gold prices down to $1,810.
CPM has one-month, three-month ranges and eight-quarter quarterly price projections with greater discussion of the factors behind CPM's analyses provided in CPM's monthly subscription service, the Precious Metals Advisory.
While short-term trade recommendations provide high risk – high reward opportunities for investors, it is difficult to capture the complex web of factors affecting precious metals prices and the nuanced CPM analyses of these factors that goes into our firm's price projections. In addition to these short-term outlooks, CPM Group provides clients enhanced trade recommendations that include one and three month price projections, as part of our Retail Investor Program. Contact CPM at info@cpmgroup.com for details.
Notes:
Initial Target Prices and Timeframes are just that: Initial. If CPM does not issue a new Recommendation during or after that time it indicates that CPM is maintain the posture in the most recent Trade Recommendation.
Discretion should be allowed at +/- 0.20% of the price at the time each TR is issued from the target. Recommendations are valid until the target date or a new Trade Recommendation or message is issued by CPM.
CPM's preferred investment strategies use physical, futures, forwards, and options.
Disclaimer - Past performance is no indication or guarantee of anticipated future profits, and neither Kitco Metals Inc. nor CPM Group can accept any liability or responsibility for any loss suffered as a result of gold price fluctuations. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000. Therefore this trade recommendation does not give rise to rights to claim compensation under the Financial Services Compensation Scheme. CPM Group is a registered CTA with the U.S. NFA and CFTC. At times the principals and associates of CPM Group may have positions in the precious metals, commodity, and equities markets. CPM Group also manages investment and industrial positions in markets for its clients.
