I'D BE PANICKING IF I HAD BITCOIN! Gold and Silver NEW HIGHS Are Certain Very SOON - Lawrence Lepard
Gold prices edged higher on Tuesday, recovering from their lowest point over a week earlier in the session. The dip came as safe-haven demand waned, spurred by optimism surrounding a potential ceasefire between Israel and Hezbollah militants in Lebanon. Despite the recent fluctuations, gold has surged an impressive 27.57% since the beginning of 2024. This marks a continuation of gold's bullish trajectory, with the precious metal hitting an all-time high of 2,790.07 dollars in October 2024.
However, gold mining stocks have not mirrored the metal's impressive gains. Historically, gold stocks tend to amplify gold's price movements, often rising two to three times as much as the underlying commodity. Yet, as Lawrence Lepard, founder of Equity Management Associates, points out, this correlation has faltered. For example, shares of Barrick Gold, one of the largest mining companies, have only risen 19% over the past year, underperforming the nearly 30% rally in spot gold prices.
Lepard suggests that this discrepancy stems from lingering skepticism in the market. Many investors remain unconvinced of gold's long-term strength, expecting prices to decrease. Nevertheless, Lepard is optimistic that this sentiment will shift as the reality of persistent inflation and unresolved fiscal challenges becomes undeniable. He predicts gold could breach 3,000 dollars within the next six months and reach 4,000–5,000 dollars by the end of this cycle, with even loftier prices possible over the longer term.
Looking ahead, geopolitical developments and US economic indicators will play a pivotal role in shaping gold's next moves. Investors focus on Wednesday's US inflation data as markets assess the Federal Reserve's future policy direction. The Thanksgiving holiday-shortened week has also prompted profit-taking among gold buyers, adding to the volatility.
The US Federal Reserve has continued its easing cycle with a series of rate cuts in recent years, the latest being a substantial 50 basis points reduction just weeks ago. While this move aims to support economic stability, it has ignited concerns about potential disruptions in financial markets, particularly in money-market funds.
According to Apollo Global Management's chief economist, Torsten Slok, the Fed's rate cuts could trigger a massive $2 trillion exodus from money-market funds, which recently reached a record $7 trillion in assets. As yields on these traditionally safe investments decline, investors will likely redirect their funds toward higher-yielding assets, potentially fueling volatility and asset reallocation across portfolios.
This shift underscores the delicate balancing act the Federal Reserve faces. Lawrence argues that the Fed is effectively "trapped" in a cycle of inflation and intervention. When financial instability arises, as it inevitably does, the Fed prioritizes immediate economic stability over long-term fiscal responsibility. This approach often leads to increased money printing, justified as a necessary response to crises, perpetuating economic inflationary pressures.
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