With the pause behind us, the markets are looking ahead to the next big development.

...And it could be very good for gold investors.

June 19, 2023

Dear Fellow Investor,

We’re already deep into the summer doldrums, when many investors are more focused on beaches and frozen cocktails than the markets.

I don’t blame them. Temperatures hit the high 90s down here this weekend, and I consumed my fair share of Mai Tais, enjoying a break from the price quotes for metals and miners.

That break is continuing today, somewhat, as most markets are closed for the Juneteenth holiday. Spot gold is trading in an abbreviated session, however, and the yellow metal is down about $5 as I write.

Currency markets are also open, and the dollar is taking advantage of the thin trading to make a slight counter-trend move with a small gain.

As I noted last week, the recent drop in the Dollar Index, particularly last Thursday, is evolving into something significant. This bears watching, as it’s occurring as part of the next big theme in the investment markets.

And because of that emerging theme, investors who aren’t paying attention during these doldrums could miss one of the better opportunities in years.

In markets that have grown ever more dependent upon monetary policy over the last 15 years, traders are constantly looking ahead for the next big move or decision by the Fed and other central banks.

Now that the Fed’s pause is behind us, the markets are looking ahead for the pivot — actual rate cuts.

This isn’t a new thing. As you know, I believe that gold (which has been flirting with all-time highs in recent months) and Treasury futures (which not long ago were predicting rate cuts as soon as September) have been focused on the pivot for a while.

In fact, I contend that they’ve been factoring in more than a recession, because a recession couldn’t be technically confirmed before next year. If the Fed cuts rates this fall, it won’t be in reaction to an economic slowdown, but because a crisis of some sort forced its hand.

Whether that crisis is an escalation of the problems in the U.S. banking system, a crash in the over-valued stock market, a derivative blow-up or something else, we’re at a place in economic history where nothing would be a surprise.

And big money is betting that something big is going to happen.

Right now, we’re in a very interesting place in the markets, with lots of cross currents.

The 10-year Treasury yield has bounced around after the Fed pause, as the dovish move balances against the oncoming tsunami of new debt issuance after the resolution of the debt ceiling deal.

So the Treasury market isn’t delivering clear signals at the moment in regard to future Fed policy.

Where we are getting some signals, in my opinion, is in the currency markets. In short, I think the dollar weakness I mentioned above reflects the new assumption that the Fed will be the first central bank to pivot.

If investors are making that assumption now, I expect gold to respond as well in the days just ahead.

This runs counter to the history of the summer slowdown. Usually, gold falls in early summer, bottoming sometime from mid-July to mid-August. But if this early trend in the dollar is a sign of a new theme emerging in the macro picture, gold could rebound within days.

That adds some urgency to what is usually a casual accumulation period for junior mining stocks.

As I noted last week, there are lots of great companies selling at what appear to be rock-bottom levels right now. But that might not last long. One of my two new stock picks in our June issue of Gold Newsletter is already beginning to move higher.

If you want to get the details on those new picks, and my on-going coverage of metals and mining over what I believe is going to be a pivotal and very profitable year ahead, click here to sign up now.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference