The Fed Can’t Print Gold

Analysts at Zaner Metals in a daily note wrote “The Fed can’t print gold”. For that matter the Federal Reserve cannot print dollars either, only the Treasury Department can do that. However, the current monetary action which includes additional purchases to their asset sheet, coupled with taking interest rates to near zero has had a profound impact on gold pricing. More importantly the Federal Reserve’s not acting alone, the fact that they are revisiting quantitative easing is occurring around the globe by the largest central banks.

Although analysts are mixed as to whether gold will rise in the short-term, almost unanimously analysts believe that gold will be much higher by the end of the year.

In fact, it was reported that analysts at Bank of America were so bullish on gold that they raised their 18-month target from $2000 per ounce to $3000. They attribute this reevaluation to the unprecedented monetary policy of the majority of global central banks. This action by the global central banks are diminish the effects on the global economy from the COVID-19 pandemic.

It was reported by Jim Wyckoff of Kitco News, that “The bank [of America] said in a report last week that gold ’s technical momentum could drive prices to an all-time high this year; in a new report published Tuesday, analysts have officially increased their bullish outlook, saying that gold prices could hit $3,000 within 18 months, a 50% increase from its previous forecast. As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. And investors will aim for gold”.

With all the uncertainty regarding the pandemic and future price gold there is one certainty, and that is that the volatility as well as the daily price range continues to expand and get larger. $80 to $100 price swings in a single day are not considered unusual. Although they do not occur every day typically there is a $50 plus price range on any given day as gold trades.

It is abundantly clear that until after the world’s medical community either creates a vaccine or finds medication which aids in the recovery of this deadly virus, the economic fallout which is been created as a net result of a global economy will continue to contract at an alarming rate.

It is for that reason that long after the pandemic is over gold will continue to rise as financial community comes to grips with the tremendous monetary resources that they are collectively throwing at the pandemic’s repercussions in the global financial markets.

Our technical studies indicate that there is solid support for gold pricing at $1662, which corresponds to the 38% Fibonacci retracement of the entirety of the rally which began at $1465 and topped out at $1788. There are multiple levels of minor resistance based upon recent market tops, with the first level occurring at $1754, another level occurring at $1773, and the yearly high of $1788. The brass ring continues to be gold closing above $1800 per ounce and that is where major resistance occurs.

As of 4:13 PM EST gold futures basis the most active June contract is up $49.50, and fixed at $1737.20.

Wishing you as always good trading,