While gold is up a few dollars today, the correction from recent highs continues.

But Fed rhetoric on continued rate hikes should only briefly delay the upward trend.

February 27, 2023

Dear Fellow Investor,

Hawkish Fed commentaries, hotter-than-expected inflation numbers and persistently strong economic data have combined to shape a view of rate hikes lasting well into summertime.

While that’s continued today, with January core durable goods orders coming in at 0.8% month-over-month, well above the consensus expectation of no gain at all, gold is actually (and thankfully) up a few dollars.

As I told you last week, I think we’re still in for a bit more of a correction, with gold trading sideways to flat going into the Fed’s next meeting, which concludes on March 22^nd.

That view has come a long way from how bullish I was a little more than a month ago. Back then, I was speaking at a couple of mining conferences in Vancouver and noting how gold had risen more than $300.

While I noted it was extremely overbought and due for a correction, I frankly didn’t expect as much of a correction as we’ve gotten.

It’s been a fairly precipitous drop since the peak in late January...which begs the question, “How low will we go?”

As you may be able to see from the chart above, we’re down about 38% from the peak, which could mark a nice line of support.

I’ve also maintained that the $1,800 level should act like a magnet for the price, so I wouldn’t be surprised to see us breach that level and trade around it. A 50% retracement would put the price, basis continuous contract, at around $1,787.

So, from a technical standpoint, those are some key numbers to watch. From a fundamental view, it’s important to remember that the macro picture remains extremely bullish.

Although inflation has remained persistently high and data continues to show a resilient economy...with all that contributing to continued hawkish commentary from the Fed...we know that Powell & Co. are nearing the end of their rate hikes.

The timing for a pause may have been pushed back a month or two, but it’s coming — and probably much sooner than the current consensus view of the summer.

And just a pause in the hiking cycle will be enough to light a fire under the metals.

So watch those technical support lines, but also know that the longer-term picture argues that current levels are already a bargain.

All the best,

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