Pullback or Not, Record Highs Ahead in Gold

April 14, 2023

by David Brady Sprott Money

Fundamentals are clearly driving the bus in Gold and Silver. Ever since the Fed announced its plan to reduce rate hikes at the FOMC meeting on November 2nd, Gold has gone more or less straight up from 1618 and is on the verge of testing the record high of 2089 in August 2020. Employment and inflation data influence Fed policy, and they have contributed to the rally as jobless claims rise and both the CPI and PPI continue to fall. The recent mini-banking crisis, which is just on hiatus right now, also sent Gold soaring on March 9, when Silicon Valley Bank got into trouble. This also affects Fed policy and therefore Gold.

Now the Fed is planning on just one more 25bp hike on May 3. They’re basically done tightening. Even if they do hike, they will likely pause given the recent data and less lending by the banks in response to the banking crisis. A pause in Fed policy would signal risk on for everything but the dollar over the next few months.