Shifts in Fed messaging tend to bring weakness in gold and silver prices, said Brien Lundin of Gold Newsletter. But that should change once the central bank acts.
The long-term future for gold looks secure, but in the short term there’s more uncertainty for the yellow metal — that’s according to Brien Lundin, editor of Gold Newsletter.
Speaking to the Investing News Network, he said while investors can be fairly certain the gold price will be higher in two, three, four or five years, the weeks to come are harder to gauge.
Lundin, who also hosts the New Orleans Investment Conference, said the US Federal Reserve is in the midst of shifting its messaging, and in periods like this it’s typical to see weakness in gold and silver.
“The good news is once we see some actual action in regard to Fed tightening, that typically marks a bottom in the gold price, and the silver price as well, because the speculators, having bought the rumor of Fed action, then sell the news,” he said. “That releases some of the selling pressure, some of the shorting pressure on the metals. So that typically marks a bottom.”
This scenario played out in December 2015, on the downslope of the Fed’s reaction to the last crash — Lundin explained that a significant bottom for metals at that time led to a six month rally.
He thinks that could happen again. “The question is what is going to be the trigger point — is it going to be actual rate hikes, which may not come until 2023? Or will it be tapering, which will probably be announced at some point over the next month or two and probably won’t start until early 2022?”
Clarifying his expectations, Lundin said he doesn’t expect to see a year-long period of gold price weakness in the lead-up to the first Fed rate hikes. “But I do think we’ll probably have two to four weeks right now as we still have some of this murkiness in terms of Fed messaging.”
Watch the interview above for more from Lundin on gold and silver, including unnoticed trends in the market, as well as his thoughts on the broader commodities space.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.