The Short-Term Path For Gold Gets Messier
Submitted by QTR's Fringe Finance
After an incredible, astronomical run over the last 2 years that saw the blog’s 25 Stocks for 2025 torch the S&P 500 by more than 50%,
I talked about lightening up gold and silver positions on January 26th of this year at around $5,150 and $110, which I viewed as major technical level touching points that served as great markets to take some profits. I shared the $5,000/$100 sentiment as target prices to take some profits on several podcasts and other articles as well.
The structural case for owning gold long-term, however, may be stronger today than it was a decade ago. Governments around the world continue piling on debt with little indication that fiscal discipline is returning anytime soon. The United States continues running massive deficits, and interest payments on that debt are becoming a larger and larger issue.
Central banks are still accumulating gold as a reserve asset, geopolitical fragmentation continues to intensify, and confidence in fiat currencies continues to erode slowly at the margins. Those trends are not short-term stories. They are secular forces that can play out over years. That is why I still believe gold remains one of the most compelling long-term assets in the market.
That long-term conviction is precisely why recent price action has been so frustrating for many gold bulls. This morning offered another perfect example. Reports emerged that Iran may have struck a U.S. vessel with missiles, which under the old market framework would have sent gold sharply higher. Instead, gold fell roughly $50. That type of move would have seemed bizarre years ago, when gold was treated almost exclusively as a pure geopolitical hedge and safe haven asset.
In the old playbook, rising global instability meant investors rushed into gold. Today, the reaction function is far more complicated, and I think it says something unexpected about the short-to-mid term thesis in gold right now.
Gold’s reaction function has changed over the last six months. At the start of the Iran conflict, gold behaved the way gold bulls expected it to behave: missile strikes, regional escalation fears, and oil-supply risk created a classic safe-haven bid. But lately, similar headlines have produced the opposite reaction.
The market is no longer treating geopolitical volatility as automatically bullish for gold. It appears to be asking whether the volatility keeps inflation hotter, oil higher, the dollar stronger, and rates elevated for longer.
That explains why gold can now fall on headlines that once would have sent it higher. A conflict headline is still supportive in one sense because it raises uncertainty. But if the same headline pushes oil prices higher and causes traders to price out Fed cuts, the opportunity cost of holding gold rises.
Gold does not pay interest, so when markets believe the...(READ THIS FULL ARTICLE HERE).