Post Jackson Hole uncertainty to eventually support gold stocks

Ad blocking detected

Thank you for visiting CanadianInsider.com. We have detected you cannot see ads being served on our site due to blocking. Unfortunately, due to the high cost of data, we cannot serve the requested page without the accompanied ads.

If you have installed ad-blocking software, please disable it (sometimes a complete uninstall is necessary). Private browsing Firefox users should be able to disable tracking protection while visiting our website. Visit Mozilla support for more information. If you do not believe you have any ad-blocking software on your browser, you may want to try another browser, computer or internet service provider. Alternatively, you may consider the following if you want an ad-free experience.

Canadian Insider Club
$299/ year*
Daily Morning INK newsletter
+3 months archive
Canadian Market INK weekly newsletter
+3 months archive
30 publication downloads per month from the PDF store
Top 20 Gold, Top 30 Energy, Top 40 Stock downloads from the PDF store
All benefits of basic registration
No 3rd party display ads
JOIN THE CLUB

* Price is subject to applicable taxes.

Paid subscriptions and memberships are auto-renewing unless cancelled (easily done via the Account Settings Membership Status page after logging in). Once cancelled, a subscription or membership will terminate at the end of the current term.

 

An excerpt from the Market INK distributed to Canadian Insider Club members and INK Research subscribers August 29th.

Uncertainty is the clear standout image from Yellen's Friday speech as depicted in the megaphone-like chart (Figure 1) she provided showing the confidence range of policymaker Fed Funds forecasts over the next two years. The range appears to span from 0.125% to 4.5%, with 0.125% being the lower bound cut-off (editor's note: the Fed picked the yellow colour for the chart). While the Fed chair did not hand out diagrams for other forecasts such as inflation, one can only assume similar blow-out ranges would also be the story.

The level of uncertainty is likely to be a tailwind that helps the gold market over the next few years, countering the short-term headwinds of lower inflation and possibly higher short-term rates. For gold stock investors, the yield curve may provide the best clue as to whether the gold bull market remains intact. If the yield curve fails to modestly steepen on the back of bullish Fed rate chatter, it will be signalling a potential economic slowdown that will eventually have to be countered by the Fed with more easing, asset purchases (which could be expanded beyond government debt), and probably more government spending.

Indeed, the INK Gold Indicator moved back above 70% on Friday for the first time since July 7th. Gold stocks are currently in a correction, with the S&P/TSX Gold Composite down about 16% from its recent peak. Since we are still in the seasonally weak period for gold, continued volatility and testing on the down side should be par for the course particularly as we head into the US jobs report on Friday. The Fed has essentially backed itself into a corner, implying that it will raise rates in September if the report is strong. The risk of that happening should shake out some short-term gold stock speculators, if it has not already.

In contrast to the immediate challenges faced by gold in a perceived low inflation-higher rate environment, Technology could be seen as a relative winner. 

To read the full Market INK report, join the Canadian Insider Club or log into your Canadian Insider Club (above) or INK account now.

 

Comment On!

140
Upload limit is up to 1mb only
To post messages to your Socail Media account, you must first give authorization from the websites. Select the platform you wish to connect your account to CanadianInsider.com (via Easy Blurb).