Last week gold smashed through $1600 an ounce and on Friday many of the big cap mining stocks made new 52-week highs. People are starting to take notice of this price action, but what just about no one is talking about is why it is happening. I certainly saw no one explain things Friday night on CNBC after the market close and I doubt they will today either beyond blaming the coronavirus. But much more is going on. Gold went up last year without that virus news.
So you need to know the reason gold is moving now.
It is simple.
Last week the yield curve inverted again. The yield on the 3-month Treasury bond is once again higher than the yield on the ten year-bond, which is yielding just about nothing. You can see this move on this chart.
The Fed Fund futures market is now pricing in a 90% chance of a rate cut before the end of this year. But with rates so low already there just aren’t going to be many more rates cuts available after the next stock market drop or recession beings.
So what is the Fed going to do?
On Friday Federal Reserve Governor Lael Brainard gave a speech in which she told us. She said that the Federal Reserve is likely to announce a cap on interest rates and keep them low by increasing its QE money printing operations in a big way to buy Treasury bonds itself.
They will essentially monetize the debt.
It was a huge thing for a Federal Reserve official to admit and some who heard her remarks realized they need to get ahead of that operation and buy gold and silver.
Imagine where gold and silver will be when the next round of rate cuts actually happens and these type of money printing operations become widely talked about?
This is why gold is just starting to go up just like when it began to move last year when it went through $1350 an ounce. $1600 is the new $1350 and now gold is eyeing $1710.
There is only a short window of opportunity to get on board. To be a part of this move with me just grab my Total Gold Trading Program:
-Mike
