| Gold rockets in reaction to new Fed policy... |
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| Gold Newsletter Preview: |
Setting The Stage
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After two powerful rallies so far this year, gold is now setting the stage for its next advance.
Whether this period of rest lasts days, weeks or months, the end game will be the same.
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A couple of days ago I showed you how gold has been advancing in a stair-step fashion, pausing in a trading range after each big rally.
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The last two days of trading have perfectly illustrated this behavior…and why we’re in the middle of a prime buying opportunity.
Let’s take a look at what’s happened over a tumultuous 48 hours in the gold market.
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The Fed Says It Will
Let The Genie Out Of The Bottle
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Just as we were going to press yesterday with our September edition of Gold Newsletter, Fed Chair Jerome Powell took the podium for his eagerly-awaited speech.
As you’ll remember, this speech — the keynote of this year’s “Jackson Hole” virtual Fed meeting — had been promoted as unveiling a blockbuster new Fed strategy toward inflation.
It lived up to everything but the “blockbuster” label.
As expected, Powell announced the Federal Reserve would no longer target a 2% rate of inflation, but rather that “following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation immediately above 2% for some time.”
None of this was new news. However, what did surprise me was Powell’s confession that the primary reason they want higher inflation is so they can ratchet interest rates up along with the inflation rate, and therefore have room to cut rates when they feel they need to pull that lever.
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In other words, they feel powerless at the zero-bound to manipulate the economy according to their wishes. Yes, it’s all about power — but for the public good, of course.
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The bottom line is that the Fed wants to maintain zero to negative real rates and still have the option of rate cuts. If they want the ability to cut rates to any meaningful extent — which means 300 basis points or more — then they’ll have to accept much higher rates of inflation.
In anticipation of yesterday’s news, gold rose $26 on Wednesday, and initially rose as much as $30 more immediately after Powell’s speech. It wasn’t to last, however, as the metal gave back all of those gains and more, dropping about another $25 as Treasury rates rose in response to the Fed’s new stated policy.
I think the bond market rose in fear of the very inflation that the Fed is wishing for, and the resulting rise in real rates temporarily dampened the market’s appetite for gold. As I noted in a couple of media interviews yesterday, I predicted the sell-off would be temporary, as the Fed’s new emphasis on higher inflation is extremely bullish for gold over the long run.
Also, gold has shown remarkable resilience, refusing to allow any significant correction as it consolidates the previous rally. In short, it’s consolidating its new price range through time and not price.
Sure enough, gold quickly bounced back today. As I write, it’s back up about $40 and powering ahead.
In the process, it’s delivering a loud signal that we need to heed.
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In our September issue of Gold Newsletter, which was dispatched just hours ago, I explain how this new trading range for gold is simply a pause before the next big rally.
In a series of powerful technical charts, I show how this stair-step pattern for gold actually goes back to late 2018…and how powerful the step-up rallies have been.
From a more practical standpoint, I review fully 39 high-powered junior mining stocks, providing my specific buy/hold recommendations for each…
…And unveil four exciting new picks:
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1) A tiny company with a project that has yielded drill intercepts like 24.5 g/t gold over 30 meters…and is having a major drill program (right now) completely funded by a major mining company.
2) A company that owns a significant share of one of the world’s largest copper-gold deposits — a project that the majors will be free to bid for within just a few weeks.
3) A company that, amazingly, boasts a million-ounce gold deposit with rich, open-pittable grades, yet still trades for just a fraction of the valuation of its peers. I have no idea how this one was passed up by the market, but we’re jumping on it while it lasts.
4) And finally, a very small company (with a market cap still under C$10 million) that just scooped up a property with previous drill results of 6.51 g/t gold and 1.41% copper over 50.32 meters! The majors are already circling around this new hot spot.
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Gold is taking off once again. And while I believe it will trade in a range for a couple of months or so, I could be wrong..
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It could explode higher in its next big rally at any time.
Considering that each of the last two rallies this year took the price up over $300, the potential for the mining stocks I detail in this issue of Gold Newsletter is simply extraordinary.
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Our readers are already reaping huge profits from the junior mining stocks we’ve uncovered. And now I’m revealing four more companies I’m confident will be among tomorrow’s biggest winners.
You can get all the details — and position yourself for this monumental new bull market in metals and mining stocks — by subscribing to Gold Newsletter now.
To get a full year of Gold Newsletter…and get immediate access to our exciting September issue…click on the link below.
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All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference
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