There’s no doubt gold has been on a hot streak over the last few months – if this caught you off guard and you didn’t seize previous opportunities to buy, don’t let this morning’s window slam shut on you.
There is a strong opportunity to buy the dip right now as markets begin to price in the likelihood that the Feds will skip a rate hike this month, but resume increases in July. This expectation has been sent by the latest inflation figures, which show that while top line inflation has now declined to around 4%, core CPI is still at 5.3%. CPI is often used as the baseline when making policy decisions as it doesn’t include food and energy prices, which can oscillate much more frequently than prices for other items.
The net result is that while inflation is down – the CPI figure dipped from last month’s 5.5% reading – it’s still a long way off the 2% target set by the Federal Reserve, meaning further rate increases remain likely.
Economists Sarah House and Michael Pugliese of American multinational bank Wells Fargo explained, “Today’s data should lock in a pause at the June FOMC meeting, i.e., no rate hike. However, we expect Chair Powell’s press conference and the latest Summary of Economic Projections to signal that one more rate hike is still in the cards. Directional progress should not be confused with mission accomplished. There is a lot of ground to cover between the 5.0% run rate of core inflation today and the FOMC’s 2% goal.”
This mixed bag has given markets pause for thought – and created an opportunity to buy for gold investors, with the yellow metal temporarily hemmed in around the £1,547 ($1,946) marker. This is a level we haven’t seen in a while but don’t expect it to stick around – it’s critical to buy the dip with the overall trajectory for gold still steeply higher.
The increase in gold prices could come at any time, with the U.S. economy in a holding pattern with a further decline in jobs and activity sitting on the horizon, but growth still registering for now. This means that a recession remains a possibility, something that would see gold prices surge.
Bill Adams, the chief economist at Comerica Bank noting, “The most likely path for the economy is further softening of activity and the job market.”
There is no time to wait. Make your move. Buy the dip now.
