Cassiar Gold Corp. (TSXV: GLDC, OTCQX: CGLCF)
Revitalizing the Cassiar Gold District in British Columbia, Canada
While seasonal factors typically drive prices higher in August, after making a new record in July, gold investor sentiment has seen some changes in recent weeks.
In its newly released monthly report, the World Gold Council (WGC) noted three major risk factors that could disrupt gold’s potential uptrend, including the Federal Reserve’s annual Jackson Hole meeting, the U.S. election, and stock market volatility.
The 47th annual Jackson Hole meeting will be held on 22-24 August, just a few weeks away from the projected timing of the Fed’s first rate cut (18 September.) WGC analysts believe that while a rate cut in September is almost a sure thing, upcoming data could still steer the Fed in a different direction. For gold, over the past decade, it has generally tended to strengthen first and then weaken a few weeks later as bond yields have tended to move higher during the annual Jackson Hole meeting.
Analysts add that there is a risk that stocks, bonds and gold could all sink if the wording at Jackson Hole suggests dovish expectations.
The second factor is US politics, which the WGC believes also has the potential to adversely affect precious metals prices this month. Since Biden’s announcement that he was dropping out of the election race, polls have shown a sharp rise in the likelihood of Vice President Kamala Harris winning the election.
During the Trump administration, policies such as significantly higher tariffs, a preference for a weak dollar and anti-immigrant policies all pose upside risks to inflation and downside risks to economic growth in favour of gold.
As it stands now, the precious metal is likely to benefit more from the uncertainty, while the national debt and deficit levels are likely to continue to cause investor concern and keep investor interest in gold high after the election is over.
A third risk factor for the gold price this month comes from the equity markets, particularly tech stocks, which have been under pressure. The WGC notes that Nvidia is due to report its second quarterly results at the end of August, while earnings guidance from Tesla, Google, Amazon and Intel has all been less than favourable. This is the first time in some time that the market has been nervous. In the next few weeks, NVIDIA’s earnings call could determine the direction of the stock market.
Analysts say that while September is usually a weak month for U.S. stocks, and August tends to be flat because of lower volume, this year August has already started to weaken. Gold typically has a strong negative correlation during stock sell-offs, which should maintain investor interest.
The World Gold Council concludes in its report that the start of the Fed’s interest rate cuts is largely predicated on the normalisation of economic data. While the jobs report and ISM data unexpectedly declined, other data still show a hot economy.
As a result, it remains unclear whether the economy will have a soft or hard landing, and the market is pricing in two rate cuts with almost 100 per cent certainty, which is dangerous for risky assets, bonds and gold. For gold, rising uncertainty and risk of unexpected events may keep investor interest high. So far, gold has done a good job in protecting portfolios.
