Latest Reports Suggest a Gold Price Surge of $1,400 in Next 60 Days
President Donald Trump has lit a fire that is overheating the global gold market. Indeed, gold bullion will simply be stormed. The threat of nuclear war in North Korea as the Kurds decided to separate from Iraq has ensured that global risk is increasing beyond measure.
The gold price today remains below the new resistance level of $1,300 per ounce. Gold price predictions for 2017 should be more bullish, however.
Geopolitical risks greatly stimulate demand for safe-haven investments such as gold. Prices increased to $1,365 per ounce on September 9, although the price of gold has since dropped to just under $1,300 per ounce. There are explanations for this. There are also indications that the price for the next three months will shift upward again, to the $1,400-per-ounce level.
If Federal Reserve Chair Janet Yellen continues offering contradicting statements about inflation and the economy, the stock markets will start correcting on the bearish side. The last week has seen a coincidence of vacillating gold and Dow Jones performance.
First, the Fed suggested a determination to end the regime of fiscal stimulus known as quantitative easing (QE). In other words, we are moving from QE to QT (quantitative tightening). The Fed has cited its reasons as inflation concerns, employment numbers, and the need to prevent an overheating of the economy.
Wall Street slowed its race to the next high of 22,500 points.
On September 26, Yellen said she was wrong about inflation, implying that the Fed would adopt QT at a slower pace. This has left both Wall Street and gold investors in limbo.
Risk Situation Remains More Favorable to Gold
The markets are in a bubble. The Fed’s quick reversal on QT has all the semblance of an effort to prevent interest rates from serving as the pin that bursts the bubble. If anything, the Fed’s dilly-dallying with the rate hike betrays its fear that the present economic house of cards could come crashing down.
Trump’s next moves in foreign policy, in the face of crises that are only getting deeper in the Middle East and the Pacific, will be able to mark the prices of gold bullion. There are also fears that his presidency is provoking a global trade war that could hinder growth.
The signal for a rise in gold was revealed through the U.S. central bank’s announcement that it is preparing ground for an interest rate increase next month. In particular, Yellen said on Wednesday that she just needed additional evidence that inflation and employment were on track to reach the set targets.
We will have a bumpy ride in the next two quarters. The promise of a rise in interest rates will, of course, have medium or long-term effects on the price of gold.
Chart courtesy of StockCharts.com
Economic uncertainty can lead to a rise in the price of precious metals, especially when we know that investors tend to bet on safe-haven values. International tensions and Trump’s reactions will likely cause a wave of risk aversion. Gold prices have already risen, notably due to the increasingly uncertain outcome of the situation with North Korea, the Middle East, Russia, and now Germany and the European Union (EU). So long as Trump and Kim Jong-un continue sparring, the prices of gold will continue to rise.
The war of words alone has stirred the markets, pushing the price of gold to gain ground. The media has a short memory, seemingly forgetting that Kim Jong-un has threatened to test a hydrogen bomb. Should Kim Jong-un raise the topic again, we could see a break in the current gold price per ounce resistance of $1,300. In light of the delicate overall geopolitical situation, one wonders how the gold price forecast for the next three months cannot resume a more favorable outlook.
After all, as already mentioned, the recent rebound of the gold price above $1,300 resulted almost entirely from North Korea’s latest claims. North Korea has described Trump’s United Nations rant against “Rocket Man” Kim Jong-un as a clear statement of war. Recall that Trump said he was ready to destroy North Korea.
What to Expect from Gold in the Next Two Months
The tension between the U.S. and North Korea remains high, but it will go higher. That’s why gold prices could break the next resistance levels and reach $1,400 per ounce at any moment. The moment that gold makes a move past the $1,300 edge, the upward trend should gain a boost. But, in the coming weeks, a new threat could further accelerate gold prices.
The Kurds of Iraq voted overwhelmingly to separate from the oil-rich Arab nation. The Kurds are split among four different countries, including Turkey, Syria, Iran, and Iraq. None of those governments want an independent Kurdish national entity on its borders because it would stir separatist ambitions throughout the region.
The recent Kurdish referendum will raise tensions in the Middle East just as ISIS is on its last legs. The Kurdish independence quest, backed by the U.S., will maintain the level of tension in the Middle East at the highest level. The political tension will be higher than that caused by ISIS because, this time, North Atlantic Treaty Organization (NATO) member Turkey will inevitably be drawn into a conflict, challenging U.S. interests. North Korea was merely the first act of the gold price recovery.