The gold market remains in a fairly tight trading range, and while price action in the market may appear dull at first glance, it could also be providing some important clues.
The gold market has not seen any significant selling pressure despite higher stocks, a stronger U.S. Dollar and the notion of higher rates. All of these factors could be considered bearish for gold and other hard assets, yet the market has done a remarkable job of hanging in there.
The inability by the gold bears to push prices lower could be considered significant. It seems that every time the gold market takes any type of dip, buyers are there ready and waiting. Although the current pressure from buyers and sellers appears to be evenly matched, that will eventually change. At some point, one side will be overwhelmed by the other, and a substantial move in the market could take place.
The question is: Who will it be? The bulls or the bears?
Despite the current headwinds working against gold, the market does also have a number of tailwinds that could help propel prices higher. In fact, markets that spend any significant time in a trading range often see sizable moves once that trading range is breached. This could prove to be the case with gold, and such a move could signal the beginning stages of a protracted bull market in the metal. In the meantime, long-term investors remain more than willing to step in and buy any dips, and unless that changes the prospects for the metal in the coming months and years look very good indeed.
Among the potential issues that could fuel an upside breakout in gold are questions over the Fed and its plans regarding monetary. Just days after President Trump named Jerome Powell to be the next Fed Chief, William Dudley, a very influential member of the Fed and advocate for monetary stimulus has announced he will be stepping down much sooner than originally anticipated. While Dudley’s departure could signal a more aggressive Fed in the coming months and years, Jerome Powell is widely viewed as someone who will pick up where Janet Yellen leaves off. Either way, the uncertainty surrounding the central bank could keep gold on the offensive.
The investigation into potential Russian meddling in the U.S. Presidential campaign has also taken a more aggressive turn in recent weeks, with the first indictments being handed down against two lobbyists who formerly worked for the Trump campaign. These charges could potentially be the first of more to come, and the issue could become an even larger distraction for the Trump administration as it tries to pass key tax and other legislation.
Should the investigation intensify and should Robert Mueller’s findings point to additional people close to Trump, the effects on markets could be significant. Of course, if Trump is completely vindicated, it could also have the opposite effect and could fuel further buying in stocks and additional economic optimism.
The current geopolitical landscape-both in the U.S. and abroad-may keep a floor under gold prices and could potentially fuel buying in gold and other perceived safe haven assets.