Battle Line Drawn: Gold Bulls Look to Push through $2,000

Stefan Gleason

Fed policymakers opted for another 25 basis-point hike — disappointing investors who had hoped for a pause in the wake of high-profile bank runs.

Stocks sold off in post-Fed trading on Wednesday afternoon. Precious metals markets, however, managed to record gains for the day.

The Fed’s final capitulation on interest rates could coincide with a breakout in gold to new all-time highs.

The battle line has been drawn at the $2,000 level. Bears eye it as an opportunity to put in sell orders. Bulls see the potential for a decisive break above $2,000/oz to serve as a springboard for an epic run higher.

On the other hand, there has also been a surge in jewelry and scrap gold being sold for cash by those who think they are getting a good price.

Of course, many people need to raise cash in order to pay bills. But exchanging gold (sound money) for U.S Federal Reserve notes (unsound money) and depositing them into a bank account carries risk.

They shouldn’t be reassured by Powell’s declaration following the Fed’s interest-rate decision that “our banking system is sound and resilient with strong capital and liquidity.”

That “strong capital and liquidity” is being provided by the U.S. taxpayer and the Fed itself via expanded deposit guarantees and emergency lending vehicles (i.e., bailouts). Such moves to make the banking system appear “sound” come at the cost of making the currency even less sound.