In the wake of a Federal Reserve meeting last week that Goldman Sachs characterized as the most dovish in years, several of the banks regional presidents have made hawkish public statements this week. The end result: The dollar has strengthened, and gold has fallen back to one-month lows near $1,220.
St. Louis Fed chief James Bullard declared that an interest-rate hike could be on the table at the April meeting, while new Philadelphia branch President Patrick Harker said that we need to get on with it.
Recession-like data piling up: These hawkish messages just a week after the Fed scaled back its rate-hike pace from four to two led CNBC to wonder whether Fed Chairwoman Janet Yellen might have a mini revolt on her hands.
But the new tough talking on rate hikes looks all for naught. Fresh home-sales data out Wednesday suggest the real-estate market is losing momentum; while a contractionary Markit services PMI report issued Thursday shows that the U.S. economy is going through its worst growth spell for three and a half years … and the worst may be to come as the greatest concern is the near-stalling of new business growth. And even more devastating was a February durable-goods orders report that dropped 2.8%, down for the third time in four months, with core orders extending a 13-month losing streak the longest streak in the history of the series with no recession, Zero Hedge noted.
Gradual pace to support gold: As a result, the Atlanta Fed was forced to downgrade its projection for U.S. growth, putting current GDP at 1.4%, down from an earlier 1.9% estimate. Is declining growth the type of environment in which the Fed can afford to hike rates?
The conflicting back-and-forth among Fed officials appears to be just more razzle dazzle. The Fed comments put a bit of pressure on the gold price but are unlikely to derail a more positive long-term sentiment towards the metal, ABN Amros Georgette Boele told Reuters. If there was a massive rate hike and a jump in the dollar, it would be very difficult for gold to move higher, but any rate increase will be gradual.
ETF holdings still at 2-year highs: Although the media pundits are calling golds drop this week a sign that bullions momentum is fading, the statistics tell otherwise. Bloomberg reported that money is still flowing into gold ETFs and that holdings remain near two-year highs. Its peculiar that ETFs were net buyers even as prices dropped, but the narrative has shifted and remains more supportive for gold, said Bernard Dahdah of Natixis SA.
Kiyosaki touts gold, silver as shelter: Its only natural that gold prices might dip and consolidate after a roughly 20% run-up in the first two months of the year. The current pullback represents a buying opportunity, and for famed Rich Dad Poor Dad author Robert Kiyosaki, precious metals offer protection from the 2016 crash that he predicted back in 2002. Were right on schedule, he told MarketWatch in a recent interview.
Kiyosaki wrote in 2002 that the initial wave of retiring baby boomers would strain the retirement system by taking their first required distributions this year en masse.
Kiyosaki is sticking to his guns, saying that Chinas current financial crisis, as well as the Feds trillions in quantitative easing, have set up the conditions for a larger collapse.
The financial expert is urging investors to build a financial ark with gold and silver because the Fed will be forced to print even more money to prop up the markets.
The recent dip back into the $1,220 range for gold (and near $15.20 for silver) offers a tactical opportunity for investors to build the financial ark that Kiyosaki is recommending. HSBC is predicting $1,300 gold by years end, while other analysts see the price going as high as $1,450. Buy low now to sell higher later.