Precious Metals Taking it Slowly Higher

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After spending some time up and down the markets, both gold, silver, platinum, and palladium are making a gradual shift upwards. Take a look at futures contracts for gold and silver deliverable three months from now. Gold futures have hit the mid $1,300s, and silver, just over $19. Some people attribute this to the generally slower trading around this “getting-back-to-school” time.

Something to Pay Attention To

The next Fed meeting, chaired by the somewhat infamous Janet Yellen is going to be held this coming week. Note that there is little consensus on what the next steps for US financial and monetary policy will be. Should, for example overnight lending rates increase, precious metals prices will likely retreat. It would be unwise to pretend this won’t happen at some point in the future, as equities markets have been soaring. One popular appeal of gold being a hedge against economic collapse, you can see the problem.

The long-term challenge for gold comes in the form of a balance sheet recovery. The recent recession may be called a balance-sheet recession due to the increasing debt people have taken on. This makes it hard to spur growth in the Keynesian style, i.e. spending. If, however, individuals and corporations have been saving enough to at least partially correct balance sheets, gold may be in for a hit. This would mean that future dips would be just that, dips. Without the real threat of a fundamental collapse triggering a fire sale in the markets, gold may have a harder time hitting true highs.

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