EB Tucker, editor of the Tucker Letter, had predicted last October that the price of gold would see a significant rise this spring. And at the recent Vancouver Resource Investment Conference (VRIC), he went on to share his outlook for gold over the next 90 days, saying that gold’s position remains solid.
Tucker noted that there are a lot of big things happening in the gold market right now, including very slow economic growth, a move in real interest rates that usually signals trouble for gold, and a yield curve that’s no longer inverted, which would make investors think that gold will weaken in the meantime.
But in fact gold prices are very strong and are expected to rise to trading levels of $2,150 to $2,200 per ounce by the middle of the year.
Analysts and investors are always concerned about the Fed’s interest rate cuts, however, tucker’s view is that interest rates are nothing more than a means used by the Federal Reserve to control all the dollars previously printed, in order to drain the liquidity in the system. The size of the Fed’s balance sheet has shrunk from its post-epidemic peak of nearly $9 trillion to $7.5 trillion now. And at the beginning of this month, the size of the Fed’s overnight reverse repurchase agreement (RRP) usage was $615.379 billion.
At an outflow rate of $90 billion a month, by the time central banks’ balance sheets reach $7 trillion, which will be by this summer, Tucker noted, adding that investors 2024 should be cautious enough in this scenario, and that gold serves not just as a store of value, but as a good risk hedge.
Tucker added that the current gold market is smaller than it was even 25 years ago. Take Hershey (NYSE:HSY) and Newmont (TSX:NGT,NYSE:NEM) for example, the market capitalisation is almost the same, but essentially it’s like comparing a piece of candy to a gold bar, the option is pretty obvious.
