Last week, gold prices fell suddenly without warning. Gold fell on Sept 16 by 2.2%, the sharpest daily drop in almost six weeks. What happened?
U.S. jobless claims rose slightly while retail spending improved. This lifted the 10-year U.S. Treasury. Despite permanent inflationary pressures, the gold slump makes little sense. The governments are printing trillions and posting inflation data that does not represent reality. For example, the basket of goods does not match real-world gas, food, and home prices that consumers face. The gold’s selling reaction will prove temporary.
In the near term, gold may fluctuate to the downside. The Federal Reserve shows no indication of recognizing inflation. It is not raising rates.
And the U.S. dollar debasement is unlikely, so long as markets debase the Euro by even more. As markets continue to ignore higher input costs causing inflation, gold will trade at deep value levels. Metals investors may accumulate gold stocks at current levels.
Palladium, iron ore, and silver prices are dropping in sympathy with gold prices. Those metals benefit from strong demand and pricing pressures. This will lift output and encourage miners to increase production, lifting profits. Investors may look at mining stocks like Barrick Gold (TSX:ABX) and Cleveland-Cliffs (NYSE:CLF). Freeport-McMoRan (NYSE:FCX) is also down from recent highs.
