Gold prices in yellow rose more than 1% on Friday as concerns dissipated after a survey showed US consumer sentiment plummeted in early August. So has the trend in gold prices reversed now? Will the bullish scenario dominate the new week?
Jeffrey Sica: The collapse in gold is a bit overrated
Gold prices rebound sharply after falling to a four-month low on Monday, driven by the Federal Reserve. Jeffrey Sica, CEO of Circle Squared Alternative Investments, made the following comments on the subject:
The collapse in gold has been somewhat exaggerated and we are starting to see the fact that k stimulus will continue in the US and around the world.
As we previously reported , the University of Michigan’s pre-consumer sentiment index was at a ten-year low in early August, a sign of potential k impact of the fast-spreading Delta COVID-19 variant. The dollar and US benchmark 10-year treasury yields also weakened after the survey, bolstering the attractiveness of gold, which has not yielded returns and has become cheaper for holders of other currencies as the dollar falls.
Michael Gentile said two scenarios could happen
It was increased physical demand from top consumers, particularly in India and China, that gave more support to bullion. “The hope is that India’s demand recovery in particular is a sustainable trend and prevents gold prices from falling significantly,” said Daniel Ghali, commodity strategist at TD Securities.
Circle Squared’s Jeffrey Sica added that silver could rise gradually with gold, especially given the supply constraints in the physical gold market. Strategic investor Michael Gentile also commented on the markets, saying the US Federal Reserve was “trapped”. Michael Gentile said two scenarios could happen:
Either the Fed will raise rates by 25 basis points next year to regain confidence in the markets, or it will let inflation heat up and do nothing. Neither of these scenarios will be sufficient to contain inflation.
Michael Gentile: Gold fiadollaryellow is currently very low value
To truly “go to war” against inflation, the Fed would need to raise rates to at least 3%, causing the stocks to fall by 50%. Michael Gentile said that even a 25 basis point increase would trigger a 10-20% correction. Michael Gentile said that gold is currently undervalued, especially when compared to broad stock indices. Michael Gentile made the following comments on the subject:
An increase of 25 basis points in the past would not have caused great panic in the market. Considering the amount of leverage we have in the federal system, the amount of leverage we have in the market, the amount of speculation we have… I think a 25 basis point increase in the market would cause a huge pain in the market. You might see a 10, 20 or even 30% sale on a 25 basis point increase which isn’t really a big picture thing but it shows you how leveraged the system is and how little it can afford the rate increase. When the Fed ‘goes to war’ against inflation, the stock market will ‘disappear’, that is, 50% will collapse…
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