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Thursday, September 21, 2023

Top Stories This Week: Gold Drops After FOMC Meeting, How Low Can it Go?

Gold took a tumble this week, although it started the period strong.

The yellow metal traded between about US$1,835 and US$1,850 per ounce from Monday (January 24) to Wednesday (January 26), but dropped mid-week. It was just over US$1,785 by Friday (January 28) afternoon.

So what happened to gold? The major event this week was the year’s first Federal Open Market Committee (FOMC) meeting, which took place from Tuesday (January 25) to Wednesday.

With inflation concerns running high, market watchers were eagerly anticipating commentary from US Federal Reserve Chair Jerome Powell. Speaking after the FOMC gathering, he acknowledged that inflation is well above the 2 percent target, and said there’s a risk of it continuing to move even higher.

“Inflation risks are still to the upside in the views of most FOMC participants, and certainly in my view as well. There’s a risk that the high inflation we are seeing will be prolonged. There’s a risk that it will move even higher” — Jerome Powell, US Federal Reserve

Powell also noted that the central bank is ready to raise interest rates in March if the conditions are right. In addition, asset purchases are reportedly on track to wrap up at the beginning of that month, and the Fed expects to start reducing its balance sheet after it begins the process of increasing rates.

The information dump from Powell and the Fed has created turmoil in the stock market, and as mentioned, gold also reacted negatively. We have more expert commentary on the Fed’s plans lined up for next week, but for now I want to share thoughts on gold from Nick Santiago of InTheMoneyStocks.com.

We’ve had a number of YouTube commenters request an updated interview with him because he has a less positive short-term view on gold than many people I speak with.

Nick told me that although gold could rise a little higher in the very near future, he’s expecting a “pretty substantial decline” in the next year or so — he thinks US$1,500 or even US$1,450 is in the cards.

However, he was careful to explain that he would expect that drop to be followed by a major gold-buying opportunity. For him, the yellow metal’s long-term future will send it “a lot higher than the recent all-time highs.”

“When gold gets down to around US$1,500 an ounce on the futures, maybe US$1,450, I think that is going to be like a 1999 gold-buying moment, and that’s what I’m waiting for. When it does get down to that level, that low, I’m going to really go heavy into gold again” — Nick Santiago, InTheMoneyStocks.com

We often talk about gold’s upward price potential, but with Nick’s comments in mind, we asked our Twitter followers how low they think it could go in 2022. About 60 percent of respondents believe the metal could fall below US$1,700, but the US$1,600, US$1,500 and US$1,400 levels received much lower portions of the vote.

We’ll be asking another question on Twitter next week, so make sure to follow us @INN_Resource and follow me @Charlotte_McL to share your thoughts!

To close out, I want to share a quick note on INN’s outlook content. At the end of every year, our reporters reach out to experts in the many industries we cover, from gold to lithium to cannabis and more. We then compile the information these market watchers share to give our audience a look at the year ahead.

This week we published our potash and phosphate outlooks. We don’t get to delve into the fertilizer space very often, but these commodities are incredibly important because of the role they play in crop production. Both were affected by geopolitics in 2021, with prices rising to levels not seen in over a decade.

Interestingly, agriculture is an area that mining industry veteran Rick Rule of Rule Investment Media has been talking about for years as an overlooked sector.

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there’s someone you’d like to see us interview, please send an email to cmcleod@investingnews.com.

And don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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