As for now, the bullion markets are not showing any signs of strength. There are some bullish factors but they are outweighed by negative ones.
Powell Strikes a Hawkish Tone
Today, stocks are lower because investors' appetite for risky assets remains subdued, despite Jerome Powell's hawkish comments at the end of his symposium on Friday. Investors were disappointed by his remarks, which were seen as more hawkish than anticipated.
As far as we know, there is no indication that the Fed will change its stance at the upcoming meeting. So far, Powell has been consistent in his remarks and he hasn't changed his tune. It seems highly unlikely that he would suddenly announce a reversal.
As long as the Federal Reserve continues on its current course, economic worries are likely to increase substantially. If they decide to cut back on their stimulus program, those worries are likely to go up even more.
The Economy is Slowing
The Federal Reserve acknowledged that the U.S. economic expansion is slowing down. However, the labor markets remain solid, so the Fed may be forced to keep raising interest rates and raise them aggressively to achieve its desired effects.
As the Federal Reserve continues to tighten monetary policy, the U.S. dollar and Treasury yields could continue to rise. This would likely be bearish for gold prices and could cause the bears to take control of the gold price action. However, the bulls have so far been able to absorb the selling pressures well, but additional selling could be enough to push the gold price below $1,200 an ounce.
However, despite Powell's recent comments, there remains a chance that the Fed might actually begin to ease sometime next year. If so, then it would likely be a major catalyst for stronger gold prices and a weaker US dollar.
There may be other factors affecting gold prices besides supply and demand.
Besides the Fed, the gold market may need to watch out for other factors as well. One major factor is China’s potential military intervention in Taiwan. Another one is Russia’s possible military intervention in Ukraine. And yet another one is Speaker Nancy Pelosi’s trip to Taiwan.
If China decides to attack Taiwan, the US and western forces will most likely intervene. This could lead to a global war and might cause an economic crisis.
The U.S. economy continues to grow. However, the growth rate is slowing down. We expect the economy to continue growing for the rest of this year. In 2019, we expect the economy to slow down again.
Volatile times are coming. Gold prices could go up or down. If they go down, some people might decide to sell their gold to pay off debt.
Volatility in gold is at an all-time low right now. It seems like the price might be poised for a big move either way. But if we stay here too long, the move could get bigger than expected.