Gold: Buy when it – like currently – is cheap

Last Updated: 15. Februar 2024By

It’s hard to believe how extremely vulnerable the markets are right now. Yesterday, the stock markets, but especially the gold price, fell massively because US inflation rose slightly stronger in January than expected.

Gold price falls below $2,000 per ounce mark Source:

Slightly higher inflation shows nervousness in the markets The gold and silver prices fell significantly in yesterday’s trading, with gold reaching a three-month low and silver reaching a three-week low after US inflation data came in slightly higher than expected.

The US Consumer Price Index report for January rose by 3.1% compared to the previous year, compared to an average forecast of 2.9% – and an increase of 3.4% in December.

Even the „core“ CPI (excluding food and energy) rose higher than expected in January with an annual increase of 3.9%.

As a result, not only were US stock indices under strong selling pressure, but also precious metal prices, while US Treasury yields rose and the US dollar index recovered.

Fear is spreading: Will the Fed stop lowering interest rates? As always, the Fed started the party too early last fall. With its first dovish comments, the US central bank caused massively rising stock prices.

But now fear is spreading that the Fed will not deliver, given the stubborn inflation that stubbornly refuses to fall again.

However, the expectations of market participants were simply too high. In fact, the vast majority of market participants were already expecting the first interest rate cuts in March. But the Fed has already put an end to these dreams.

And the market, which is nervous to the bone, is now literally wetting its pants over a little more inflation.

Interest rate cuts are inevitable Mr. Market actually has no reason to always exaggerate immediately. Because interest rate cuts will most likely have to happen this year.

Because the longer the Fed keeps interest rates high, the higher the risk that the economy will fall into a recession. And then the Fed will have to quickly lower interest rates.

From the peak of a tightening cycle, it can take between six and twelve months for the economy to enter a recession. We are currently not quite at the end of this time frame, so there is still time, despite the current data, until higher interest rates affect the economy.

But then it will become critical. And the Fed will have to counter with loose monetary policy.

So it’s really just a matter of time.

Conclusion: Buy gold when it is cheap – like now The current nervousness in the markets is not a good sign. The longer the Fed delays the inevitable, the worse the consequences could be.

For me, the most important thing in this context is that the Fed will most likely have to lower interest rates this year. If this coincides with a recession and higher-than-desired inflation, then it is the best environment for gold.

In addition, global central banks are likely to expand their gold purchases at currently low prices. I am buying gold and selected gold stocks, as both are currently cheap.

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