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Gold Bears Turn Bullish, Ignore Fed and Traders

Posted by Metals Corporate on

Gold Bears Turn Bullish, Ignore Fed and Traders
By John McDonald

After three months of indisputable gains and multiple six-year highs, some investors previously proudly bearish on gold are changing their stance on the yellow metal. 

In fact, two prominent traders say it doesn’t matter what anyone does at the Fed or on Wall Street; gold will surge regardless at some point in the coming year. They expect that to happen sooner rather than later.

“I look at gold as higher in both scenarios,” said Anthony Grisanti, founder and president of GRZ Energy, the day before the Fed cut interest rates by a quarter of a point. 

Although Grisanti predicted a small slide in the wake of a cut, his prediction that buyers would “come into gold for protection” held true. 

This was likely due in large part to the relatively small size of the cut, which appeared to disappoint everyone involved other than maybe Fed Chair Jerome Powell.

Grisanti has been putting his money where his mouth is when it comes to gold, and so have many of his peers. He noted, “Hedge funds added about 60,000 contracts over [late June and July] in gold, so they’re getting long at a terrific pace right now in gold.” 

He believes more investors will move to acquire gold as a form of portfolio protection in the coming months.

Scott Nations, president and chief investment officer of NationShares, also commented on a looming gold bull run. Nations is notoriously bearish on gold and has been for some time. 

He said on a recent episode of the CNBC show, “Futures Now,” that “people who have been watching the show for a long time are not going to believe their ears, but I want to buy the December contract at $1,440.”

Nations explained he expected the Fed to cut rates (which it did), but “more importantly, interest rates in Europe are incredibly low.” He predicted corporate bonds in Europe producing negative yields would push investors around the globe into gold acquisitions.

“[Negative interest rates] mean that the opportunity cost from owning gold, or the penalty for storing and insuring it, disappears,” Nations said. He added, “I think as long as European rates go lower – and they’re already really low…then gold can overcome the strength of the dollar.”

Although gold prices had calmed by the end of the first week in August, October futures remained solidly over $1,500 while longtime gold analyst James Wyckoff rated the market an 8.0 out of 10, down slightly from the beginning of the month (8.5) but still solidly in bull territory

Wyckoff’s ratings range from 1 (most bearish) to 10 (most bullish), with extremes indicating a greater likelihood of volatility in the market in question.

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