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1/9/18

Gold needs dollar weakness to rally further (from IKN451)

The trading in the two days since IKN451 came out confirms this view, too. It was a short note to kick off the edition, here it is:

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Gold needs dollar weakness to rally further
Today’s intro is quick and simple. What the TIPS chart is telling us is also simple:




Unless this time is different and unless real interest rates in the USA drop to 0.4% (on the 10 year TIPS, our preferred benchmark), we’re not going to get much more of a rally in gold in these first days of the year. But the good news is that it’s looking more likely that we’ll get that sort of scenario, just not immediately. With the Fed apparently keen set on raising rates perhaps three times in 2018 (dot plot dixit) unless inflation does what the Fed wants it to do and starts rising we start looking at a zero or negative real interest rate scenario. That’s what will show on that chart above and if it does, my U$1,400/oz gold (plus U$20/oz silver) predictions should be set fair. Just not in January. Trade on, guys.