I think the Fed knows that the fundamentals support a much higher gold price. I also believe that’s part of the reason that the Fed followed through on its taper threat, thereby posturing that it would tighten monetary policy, at least for now. That would explain in the short-run – over and above the Fed’s overt market interference – why gold seems to be trapped between $1720-$1785.
The mainstream market perception is that tighter monetary policy is bearish for gold. It may be for paper gold but entities accumulating a lot of physical gold, including several Central Banks recently, don’t seem to be bothered by the Fed’s posturing. Moreover, the current prices of gold and silver do not even remotely come close to reflecting the extreme increase in the global fiat currency money supply along with idiotically high amount of debt globally.
If the Fed flinches at all on the taper – and according to the Fed policy statement it’s only a certainty through the end of December – I think gold will break sharply higher out of that chart formation.
The Korelin Economic Report invited me on to their podcast to discuss inflation, interest rates and the precious metals sector:
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