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Precious Metals
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General Precious Metals
The End of the Gold Bear Market
Precious metals got a needed bump late last week after the new Labor Department report showed just 160,000 new jobs in April. The number was less than expected, adding the fewest jobs in seven months.
The report immediately sent gold $10 higher to the $1,290 range and silver back up in the $17.50 range on Friday.
Still, gold barely managed a 0.1% gain for the week while the dollar index held a small gain — 0.5% during the same period. Silver was down a little over 2% for the week despite rallying nearly 1% on Friday.
Copper dropped to the lowest in two weeks near $2.18/lb. on continued fears of oversupply and softer than expected demand from China.
The jobs report presents an interesting dilemma for the Fed. On the one hand, it doesn’t appear there is sufficient growth to justify a rate hike in June and with the election in November, that doesn’t seem like the time for a hike either.
So what’s the Fed to do? One hike? Two hikes? No hikes and lose credibility?
And then there's the small matter of the unsustainable path the Yen has been on. Tricky times indeed.
I continue to believe we are due for a nasty round of volatility, a short-term pullback in gold and the related equities, and a host of surprises along the way.
Why? I think there is more wiggle room to raise sooner rather than later. With the recent weakness of the dollar, a lack of volatility, and a G7 meeting at the end of the month, I think chances are we get a rate hike before the election and maybe one in December. It’s hard to predict what will happen next month let alone in seven months.
One thing is clear. We are now near the end of the gold bear market or at the very beginning of a new gold bull market that will last for many, many years.
I lean towards the line of thinking that says we are near the end of the gold bear market and that we get one last leg down.
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