The gold market is lower today as a stronger dollar and higher yields take a toll on the market. A lower crude oil market is also not helping gold at all as the metal sinks to the key $1700 level. While the market appears ready
to close right at $1700, the bears are very close to producing a close below this level that could entice more bears to get short. A close below the $1700 level could set the market on a lower trajectory and make it more difficult for the bulls to recover.
The yellow metal is responding to the same old trifecta of the dollar, yields and oil. These outside markets are all in a bearish posture for gold today and could remain in such a position for months to come. The Fed’s hawkish rhetoric is playing a role, as it will likely support the dollar and yields in the months ahead. As long as the dollar continues to rise, the gold market may have little to no upside traction.
New reports of major Covid lockdowns in China may be affecting markets today. According to reports, some 21 million people have been locked down due to an outbreak. This is not good news for the globe’s second-largest economy. The U.S. and other nations are already fighting what may be an inevitable recession. If China sees a major slowdown due to Covid, look out below. Stocks could potentially tank and the gold market could potentially receive some of the capital that exits equities and risk assets. September is oftentimes a rough month for stocks, and the first day of the month this year is proving to be no different.
Not only are new Covid lockdowns affecting market psychology, but some poor data out of China is also having a negative effect. Both the Purchasing Managers Index as well as housing data showed weakness. If the poor data stream turns into a trend it could equal major trouble for U.S. and global markets.
To be clear: The long-term bullish narrative for gold remains firmly intact. The U.S. is still riddled with massive, unpayable debt. The dollar is still an essentially worthless piece of paper. The time for gold will come, the only question is when. That makes now, right now, the ideal time to start or continue stockpiling this important metal. Prices at current levels may be seen as fire-sale level and may not be seen again, ever, once the market turns higher. For the patient, long-term investor, gold prices at sub-$1700 may be an unbeatable deal.
Long-term investors who step into the gold market here may be substantially rewarded in the years ahead. If gold does keep moving lower, no problem. Lower prices should not be feared, but should be welcomed. Once the market does turn, it may turn rapidly. Get yourself involved in gold now before that inevitable turn occurs and you may be very pleased down the road if gold reaches $3000, $5000 or even $10,000 per ounce or more.