In less than 24 hours, the attack will be on.
The target: gold.
Gold prices are set to post their worst quarterly losses since at least 2016.
And the gold haters are set to have a field day with new fodder.
Spot gold was trading at just around $1,685 an ounce this morning. That’s about $200 (10.5%) lower from where gold started in January — and represents one of the largest first-quarter fumbles for gold on record.
Gold Price — Three Years
The price of gold has tumbled over the past 12 weeks largely due to a rally in U.S. Treasury yields and the dollar.
Despite the Fed’s incredibly loose monetary policy, T-note yields have now climbed to a 14-month high of 1.774%.
10-Year Treasury Yield — One Year
Higher Treasury yields are generally bearish for gold, a non-interest-paying asset.
Meanwhile, the U.S. dollar also sits on a four-month high, despite a massive influx of newly created cash. In the past 12 months, the Federal Reserve has added 27% to the U.S. money supply as measured by M2SL. However, the dollar has remained mostly stable throughout the COVID pandemic due to a number of factors, including a steep decline in the velocity of money.
Rising T-note yields and strength in the U.S. dollar have both helped to depress gold prices over the past several weeks — setting the yellow metal up now to experience its worst quarterly loss in at least four years. Nevertheless, the future is still extremely bright for gold.
The Federal Reserve and Biden administration are doing what they can now to both support the Treasury and stabilize the dollar. But they only have so many tricks up their sleeves and we should expect that, sooner or later, they’ll have to let market forces drive Treasury yields back down and devalue the dollar. That’s when gold starts to shine.
As I mentioned to my Junior Mining Trader members yesterday, gold’s performance over the past 12 weeks will, no doubt, serve as good fodder for those who argue against the yellow metal as an investment.
I expect the crypto crowd and other anti-gold groups will have a great time condemning gold as an archaic product. And that’s fine. I hope they have fun with it.
For us, gold’s quarterly performance didn’t come as a big surprise. After a disappointing January/February buying season, we didn’t have great expectations for gold in March. I wrote to JMT members back on March 2 saying, “I don’t think prices will average much higher in the next few weeks. March has been the worst-performing month for gold over the past 20 years. So I wouldn’t have a lot of big expectations for this month.”
So no surprises.
Going forward, however, I think there’s no doubt April will be much better for gold than March.
So if you don’t have any exposure to gold, now is probably a great time to invest.
