Gold Price Doesn’t Make Sense, Tipping Point for the Fed

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Gold fell to just below US$1,815 per ounce this week ahead of the US Federal Reserve’s meeting.

Unable to maintain its highest level of the year — more than US$2,000 in early March — the precious metal has been trading with volatility and at a lower price than might be expected given the current market conditions.

Speaking with the Investing News Network (INN) at this year’s Prospectors and Developers Association of Canada (PDAC) convention, Brien Lundin of Gold Newsletter said the current gold price doesn’t make sense.


“We are battling the perception that yields are negative for gold,” he said. “But in fact, we’re in a situation where it’s really irrelevant, because we still have very negative real yields, because the inflation rate is so high.”

For Lundin, the US Federal Reserve, which will provide commentary on interest rates this week, is powerless to really fight inflation. The central bank is expected to raise borrowing costs by 0.75 percentage points.

“I’m hopeful that sometime in the fall it’s going to be our time to see gold react, see the Fed start to get some headwinds,” Lundin said. “And we may see that long-awaited rally in gold begin.”

The editor of Gold Newsletter also said it is very likely that a recession is coming — a key concern for investors attending PDAC this year.

“Right now you can buy solid companies with real resources, some with economics on them, some even in development,” he said when asked about potential opportunities in the market. “If the market just normalizes, those stocks will be trading at three to four times the levels they are today.”

Watch the interview above for more from Lundin on gold and other commodities, and his best piece of advice for investors during this tough market season.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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