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Gold Back at $1,800 Lows as Rising-With-Inflation Theme Busted

CommoditiesNov 22, 2021 03:35PM ET
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By Barani Krishnan

Investing.com - It was good for as long as it lasted — which wasn’t too long, anyway — and gold’s rising-with-inflation story seemed to have come to an abrupt end, with no clear indications why.

Suggestions from the trade was that Jerome Powell’s nomination by President Joe Biden to hold the job of Federal Reserve Chair for four more years could be one reason, as it ushers in a higher degree of certainty over monetary policy — and a downgrade for safe-haven gold.

But gold was already down below the key $1,850 level, even before the White House affirmed giving Powell a new term and making his apparent competitor, Lael Brainard, vice chair at the Fed.

That gold was dropping even before the Fed news suggested that the more than two-week long rally in bullion had reached exhaustion despite the belief of bullion bulls that the yellow metal could run to as high as $1,900.

“The U.S. inflation story hasn’t gone away for sure, but gold’s running-with-inflation story seems busted for now and the Jay Powell story is being listed as the reason, though there’s probably more to it,” said Phillip Streible, precious metals strategist at Chicago’s Blueline Futures.

U.S. gold futures’ most active contract, December, settled Friday’s trade down $45.30, or 2.4%, at $1,806.30 an ounce. It was the biggest one-day loss in gold silence mid-September,

Despite swings below $1,850 last week, December gold had made a 5-week high of almost $1,880, shoring up the confidence of market bulls that the yellow metal could still get to $1,900 on the back of the U.S. inflation theme.

​​Bullion has always been touted as an inflation hedge. But it hasn’t been able to live up to that billing this year on market talk that the Fed will be forced in a faster-than-expected rate hike — speculation that sent Treasury yields and the dollar rallying instead, at bullion’s expense.

That trend abated somewhat after Powell assured earlier this month that the central bank will be patient with any rate hike that will only come after in the later half of next year.

Now, gold’s run on that could be over.

Gold Back at $1,800 Lows as Rising-With-Inflation Theme Busted
 

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Comments (10)
Rodney Dangerfield
Rodney Dangerfield Nov 23, 2021 2:00AM ET
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well I know one thing all the gold and silver that's been stolen and the way it's manipulated.... there's a big reason for all that
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Nov 22, 2021 8:53PM ET
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so far you could blame Dr Jerome Bubble for everything, now you can blame Brainard too jointly
Doug Favell
Doug Favell Nov 22, 2021 7:23PM ET
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Powell sold gold stocks and bought Goldman andvthe rest of his buddies banks. Even with that we had a 61 point reversal on the S&P. What a joke, the market is Powell rigged money game.
Devin Nathaniel
Devin Nathaniel Nov 22, 2021 6:34PM ET
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everything is set up nicely, any important event just a drama
caleb wong
caleb wong Nov 22, 2021 6:30PM ET
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real rubbish article
Barani Krishnan
Barani Krishnan Nov 22, 2021 6:30PM ET
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Clear the rubble in your mind first; look at the price action and related news of the day before you venture with a comment. Being emotionally tied to any market doesn't help.
Aussie AussieAussie
Aussie AussieAussie Nov 22, 2021 5:58PM ET
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That's why Bitcoin will take over, it's not manipulated like the gold market
peter neal
peter neal Nov 22, 2021 5:58PM ET
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There are now futures and inverse ETFS so I wouldn't rule out it being "manipulated" Buy BITI to short it.
Edward Chong
Edward Chong Nov 22, 2021 5:58PM ET
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bitcoin is not manipulated. u better go back to kindergarten young man.
Rodney Dangerfield
Rodney Dangerfield Nov 22, 2021 5:58PM ET
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then the kindergartener asks what happens if the power goes out or the internet goes down
Stan Smith
Stan Smith Nov 22, 2021 4:31PM ET
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Funny that stocks are rising with inflation isn't it? hmmmm
Stan Smith
Stan Smith Nov 22, 2021 4:30PM ET
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Its hilarious watching this rigged nonsense. Stocks pump and gold dives after the 'Powell' announcement hype. Now stocks are down and gold goes nowhere... If this were the 'free' markets of the late 70s Gold would be up over 20 times
Empire Destroyer
Empire Destroyer Nov 22, 2021 4:30PM ET
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Gold should be 3k by now 🤣
Barani Krishnan
Barani Krishnan Nov 22, 2021 4:30PM ET
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I hear you, Stan. It is indeed hilarious.
Barani Krishnan
Barani Krishnan Nov 22, 2021 4:30PM ET
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Without a doubt, $3k or at least $2000 plus
William Crumbley
William Crumbley Nov 22, 2021 4:29PM ET
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I need to put some of my savings in gold soon
peter neal
peter neal Nov 22, 2021 4:28PM ET
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Gold fell because the Dollar rally and the fact people trade paper Gold which are the Futures.You might to know why something happened before writing an article or be responsible for leading people in the wrong direction.
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peter neal
peter neal Nov 22, 2021 4:28PM ET
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Powell nomination was not the reason
Tom Sc
Tom Sc Nov 22, 2021 4:28PM ET
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ya how do you explain the way that the DXY has gone up with gold for the last month or so? not sure why you have to be so rude, please publish an article yourself and show everyone how much you know
Barani Krishnan
Barani Krishnan Nov 22, 2021 4:28PM ET
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Jokers R Us  I never spoke about the inverse correlation here. In fact, it's been debunked for some time, which was exactly my point to Peter Neale. The long dollar trade is trying to force the Fed's hand into a Q1 2022 rate hike. They've been trying to do that for months and Powell is not budging. That's why the dollar's been spiking. Now that Powell's firmly in his job for another four years, all the more the reason he won't do it, particularly with today's vote of confidence from Biden. Actually, it's ridiculous for the dollar to keep rising but logic has never been part of the dollar trade for a long time. If anything gold should have continued rising but that run seems to be over for now.
Barani Krishnan
Barani Krishnan Nov 22, 2021 4:28PM ET
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peter neal  Powell nomination was talked about because people needed to give an excuse for selling gold. These two paragraphs in my story will tell you what my opinion on that is: "But gold was already down below the key $1,850 level, even before the White House affirmed giving Powell a new term and making his apparent competitor, Lael Brainard, vice chair at the Fed. That gold was dropping even before the Fed news suggested that the more than two-week long rally in bullion had reached exhaustion despite the belief of bullion bulls that the yellow metal could run to as high as $1,900." You can call it manipulation, dollar rally (which again is ridiculous given that Powell isn't in the camp for an early rate hike). But gold's uptrend of the past two weeks has been broken, and the chase-the-inflation theme seems over -- that's the story today (and clearly stated in the headline)
Barani Krishnan
Barani Krishnan Nov 22, 2021 4:28PM ET
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Tom Sc  Thanks for pointing that out, mate.
 
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