CNBC's Jim Cramer just updated his gold outlook, saying that now is the perfect time to get into the gold trade after what he described as a "bizarre period" for precious metals.
"One thing about gold is that it's down this year, more or less 8%. It's down a lot less than stocks or bonds. So it has proven to be a source of protecting wealth," Paulson told Bloomberg in a recent interview. "The issue is gold's a hedge against inflation, but while the current inflation rate is high, long-term inflation expectations are still very low. It's like 2.5%. And they haven't really changed while the Fed has been raising interest rates."
"As the 10-year yield has gone from 2% to, let's say, 3.6%, inflation expectations still are around 2.5%. So before real rates were negative, now they become positive. So because real rates have become positive, that's really put a cap on gold," Paulson added.
For gold to have a convincing turnaround, the economy needs to start to slow after a slate of aggressive rate hikes. This would force the Fed to pause.
"And then [the Fed] see [it] can't control inflation. Then it's not going to come down to 2%, at best. Maybe they get it down to 4%, 5% or 6%, and then the economy weakens, they have to ease again. And then inflation comes back," Paulson described.
The realization that the Fed is not in control will boost the long-term inflation expectations and move gold higher.
"At that point, long-term inflation expectations will rise. People will not believe the Fed can control it. And then I think gold rises to higher levels," Paulson said.
Yeah that double top near $2070 looks ominous but we should see a bottom forming sometime fairly soon. Sentiment in the toilet this doesn't mean we can't crash but usually not the way to bet. Favor unleveraged longs. Use stops.
I am thinking the same thing. Waiting on a bottoming formation and I ain't getting any younger...
... does everyone work around here?
It’s only work when you have to do it
i am happy to have various projects and don’t seem to have to worry about what time or even what day I start work as there’s no client ,programme or actual budget driving the process .
I reckon I define’retirement’ as the day you can choose what you want to do
The thought of taking up golf or watching tv all day fills me with dread.
By the way, where are we?
I am in Durham North Carolina via the Garden State of New Jersey.
Oh, I meant this place... are we still hosted in the USA?
The pmbug server is in Texas. The membership is from various corners of the globe.
Texas, damn! I coming to the Austin F1 GP as soon as you are a free country again. LOL.
Vote early, vote often!
Hi @pmbug this ticker is free and worth having, check it out @ GIM if you like...
I've already got some 24 charts for spot prices and the USD index. That ticker can display up to five symbols/values. What would everyone find most interesting?
Looks like all markets just shit the bed bigly.
The bank sees a 30% chance of the U.S. central bank engineering a soft landing as the country avoids a recession; this would push gold prices to $1,530 an ounce as 10-year real rates rise slightly higher to 1.7%.
At the same time, Goldman also sees a 30% chance of a recession with substantial rate cuts to zero by 2025. This scenario would see gold prices spike to $2,250 an ounce.
The analysts said they see real rates dropping by 1%, but they would still remain in positive territory.
The worst-case scenario for gold would be if the inflation threat grows, forcing the Federal Reserve to continue to raise interest rates. This environment would push gold prices to $1,500 an ounce as real rates rise by another 1.5%. Goldman sees a 20% chance of this happening.
In the fourth scenario, Goldman sees a 20% chance of a recession with limited rates cuts, which would push gold prices back to $2,000 an ounce.
In this scenario, the Fed Funds rate is expected to fall back to 2.5% by 2025 as the central bank balances growth concerns with persistent inflation.
Gold prices are seeing some significant momentum early Friday as investors react to the news that the yield on two-year notes rose more than 50 basis points above 10-year yields. This is the most considerable yield curve inversion since the 1980s, which was also the last time the Federal Reserve was this aggressive in tightening interest rates.
Many economists have noted that an inversion of the yield curve - the cost of short-term borrowing outpaces long-term costs - has always preceded a recession.
"The threat of a recession is at its highest level in 40 years, and that will continue to support gold prices," said Ole Hansen, head of commodity strategy at Saxo Bank.
Although markets continue to expect the Federal Reserve to aggressively raise interest rates through 2023, Hansen said that those expectations could quickly shift as the recession threat materializes.
"Investors are quickly going to realize that the Fed will not be able to get inflation back to its 2% target. We expect to see slower economic growth and inflation between 4% and 5% and this environment will be bullish for gold."