As the world’s premier investment manager and financial market journalist, I am here to provide you with the latest insights on the current state of the precious metals market. Gold’s recent breakout attempt has failed, causing it to retreat back into the consolidation zone of $2300 to $2400 per ounce. Similarly, silver has reversed course and is now testing support at $29.
In order for precious metals to regain their upward momentum, they must first overcome this technical setback. However, there is a macroeconomic development on the horizon that could potentially be very beneficial for precious metals in both nominal and real terms.
One key indicator to watch is the yield curve, which has been inverted for over two years. Historically, when the yield curve steepens into positive territory, it has been a reliable signal of an impending economic recession. This steepening can actually be a positive sign for gold, especially when it is in a long-term bull market.
By analyzing the yield spreads between different maturities (such as 10-year and 2-year bonds) and comparing them to gold and the stock market, we can see that previous instances of yield curve steepening have been favorable for gold prices.
Looking ahead, it is likely that the yield curve will continue to steepen, leading to a recession and prompting the Federal Reserve to begin a new easing cycle. In such a scenario, gold is expected to outperform the stock market and potentially reach a target of $3000 per ounce.
The severity and duration of the upcoming downturn will play a significant role in determining the upside potential for precious metals in the coming years. However, the outlook for the next 12 months remains positive.
For investors looking to capitalize on the potential upside in gold and silver, it is important to focus on companies with strong fundamentals and significant growth potential.
In conclusion, the current market conditions suggest that precious metals may be poised for a period of outperformance relative to traditional investments. By staying informed and strategically positioning your portfolio, you can potentially benefit from the upcoming trends in the precious metals market.