Gold - The Next Big Surprise
By GCRU Gold News on Thursday, March 8 2018, 01:07 - Permalink
The way I see it, one of two things will happen in the coming months. If the economy continues to gain steam, as per yesterday’s post (That’s not a bond bear market), the Fed will lag in raising rates. This will cause real yields to decline as inflation picks up. This will be good for gold, resembling the 1970s period where Fed Chairmen Arthur Burns and Bill Miller neglected to raise the Fed Funds rate as quickly as inflation.
But there is another possibility. What if all the economic bulls are wrong? What if China slows down (This cycle - It’s China)? What if all the economic optimism surrounding Trump’s tax cuts are all priced in? What if the next surprise is the economy slowing down, not the other way round?
In that case, the Fed will pause and the massive short position at the front end of the curve will be seriously offside. Short rates will plummet. Gold will rally harder than Heather Locklear parties on a Saturday night.