We Could See $1,400 Gold by March 2017 by Byron King
By March 2017, I believe we could see gold move back up over $1,400 per ounce.
The fact is that, President Donald Trump or no, come next January, the U.S. will still be firmly ensconced in an era of reckless monetary policy. It’s no stretch to say that the current money system cannot sustain itself. Many years of low interest rates — and, more recently, negative real rates — have wrecked the financial future of a large portion of U.S. households.
The breakdown in U.S. monetary policy is just a question of time. And we think the starting gun will go off this December, with a loud shot fired by the Federal Reserve.
Last December, at the end of 2015, the Fed implemented a tiny, quarter-point interest rate increase. The dollar strengthened and investors fled the market, causing huge share price drops in January and February.
Looking ahead, the Fed is likely to raise another quarter-point this December, repeating the mistake of December 2015: raising rates in a weak environment.
The economy isn’t strong enough to support the rate increase, tiny as it may be. But the Fed isn’t increasing rates to cool off the economy. This is a tactical move to give the Fed more room to cut rates during the next recession.
Fed policymakers have outright admitted that rates will probably plateau after December, meaning they’ll remain far below historical norms. This also means that the Fed won’t be able to cut rates far enough to truncate the next financial collapse.
If the Fed and stocks repeat their December 2015 playbook, expect gold to repeat its 2016 trajectory as well: Let’s look at a chart of the last two years of gold prices:
As the chart shows, gold prices drifted down in the second half of 2015, reaching a low point at the end of December, just after the last Fed rate increase. It’s like what has happened in the last few months of 2016, too.