Gold Price Rise 2015

The appalling US jobs data on Friday occurred while equity markets were closed for the Good Friday holiday. Bond markets were open and yields fell sharply as the market immediately understood that this puts Fed interest rate rises on to the back burner. They may never happen at all and the Fed could actually cut rates if the economy gets even worse than this. It does have room to cut.

The dollar fell back against the euro to almost $1.10 despite the alarming talk about a Greek default as soon as the end of next week. Gold and silver trading was closed on the Comex.

Gold prices to jump

You don’t need a PhD in rocket science to see that precious metals are going to leap up in price in response when they are out of the trap on Monday. How high is another question. But both the weaker dollar and the possibility of a default on its IMF payments by Greece on Thursday are reasons to buy bullion. 

So how will Wall Street respond on Monday? Well a slowing US economy is now confirmed. Even the arch bulls will have to concede that. The rosy jobs data has been the only thing holding the market up against the more obvious conclusion from all the other economic indicators that the economy is slowing down fast. 

Wall Street should sell off sharply. If Greece were to default on Thursday – and the end of this particular long and tortuous road is an inevitable default and it may be for the best as Warren Buffett noted last week – then the sell off would turn into a 10-15 per cent correction if not an all-out crash.

Recession coming

US equities have been moving sideways in a topping formation and from record highs are overdue for a correction. When stock markets can see the word ‘recession coming’ written in big red letters on the wall then they do fall. Stocks in companies whose profits are falling are not worth as much as they were before.

Now as gold heads in the opposite direction to the crumbling stock market others will join this trade and push prices higher and higher. Some analysts have noted that a Greek default alone would put another $200 on gold prices. Betting on the inevitable usually works.

With the US dollar in trouble at the same time as the euro just where else are investors going as a safe haven? Buying treasuries denominated in a sinking dollar? Next week will be an important inflection point for financial markets in general and precious metals in particular… silver should be the top winner!