BTFD: The “Fed Put” Now Applies To Gold

BTFD: The “Fed Put” Now Applies To Gold from King World News

With the gold market trading near the old all-time high of $1,923, one pro says BTFD because the “Fed Put” now applies to the gold market.

Gold’s Breather Creates Buying Opportunity
October 5 (King World News) – Paul Wong, Senior Portfolio Manager at Sprott:  
Markets experienced the first post-COVID meaningful correction in September as investment fund exposures were reduced, resulting in a contraction in market depth and liquidity. Despite September’s profit-taking, gold bullion posted its eighth straight quarterly gain. We see this as a buying opportunity for precious metals investors. My colleague John Hathaway, Senior Portfolio Manager, recommends: “Avoid getting caught up in short-term timing decisions; gold pullbacks should be bought.”

September proved less sanguine than August when gold bullion broke out above $2,000 to reach a new all-time high. Although gold bullion fell 4.17% for the month, it is up 24.29% YTD through September 30, 2020, and 28.07% YOY. Both silver bullion and gold mining equities pulled back in September after reaching multi-year highs in August. Despite this, gold mining equities (SGDM) have gained 33.43% YTD and 46.22% YOY as of September 30. This compares to 5.57% YTD and 15.05% YOY returns for the S&P 500 TR Index.  Silver bullion is up 30.15% YTD and 36.71% YOY as of September 30.

Gold Bullion: A Mild, Corrective Pullback
Spot gold bullion fell $82 (or -4.17%) in September to close the month at $1,886. Most of the selling occurred around the September quadruple witching period, a typically volatile period. This year’s September OpEx (options expiration) had more events than usual (massive post-COVID market rally profit-taking, U.S. election uncertainty, COVID second wave uncertainty, delay in fiscal stimulus, etc.).

From Gold’s August 6 peak price of $2,064, gold has corrected to $1,886, down 8.62%. Since breaking out the $1,375 major resistance level, gold bullion has traded in step function manner of channel projections and Fibonacci retracement levels acting as support and resistance targets. Currently, gold has pulled back in a typical A-B-C correction back to the support zone of the current trading channel range (see Figure 1).

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King World News

Interviews with market experts from around the world with a focus on precious metals.