Gold prices remain in a solid holding pattern as they await direction from the Federal Reserve. A market strategist is warning potential precious metals investors to be patient as 2024 will be a year of nuanced trading.
The gold market is overly optimistic about the interest rate cut!
Michele Schneider, director of trading education and research at MarketGauge, is bullish on gold in the new year. However, the precious metals market will likely see some volatility and weakness in the first half of the year, she says. The comments come at a time when gold remains stuck below the $2,050 resistance. cryptokoin.comAs you follow from , the market expects the Fed to lower interest rates this year. However, Schneider says the gold market appears to have gotten ahead of itself as it is pricing in aggressive easing of five or six interest rate cuts. Schneider says it’s more likely that the Fed will cut interest rates perhaps three times. He also adds that the first discount is likely in June.
The Fed is hypocritical about monetary policy because…
Schneider notes that the Fed continues to focus on inflation. Because economic activity remains reasonably strong, driven by robust consumer demand, the threat has not disappeared, he says. At the same time, consumers are living beyond their means by spending on credit. It is possible that this could significantly threaten future growth. The strategist notes that inflation now follows the same pattern as in the 1970s. In retrospect, the US economy is not expected to see any significant change in inflation pressures. In this context, Schneider makes the following comment:
What we’re seeing now is more of a correction than anything else. I don’t think this is a sea change. This is why the Fed is so hypocritical about monetary policy. Because there are reasons to discount. Additionally, there are reasons to stay higher for longer.
Michele Schneider says the Fed is dancing on the head of a pin, hoping inflation has truly bottomed out and consumers see some normalization in the economy. She adds that this uncertainty will put pressure on gold prices.
Gold prices will decline, but this will be a buying opportunity
Michele Schneider predicts that gold prices will fall below $2,000 and test initial support around $1,980. In fact, she says, it is potentially possible that it could drop to $1,940 in the first half of this year. However, he expects this to be a significant buying opportunity as the weakening economy forces the Fed to lower interest rates and give up on fighting inflation. In this regard, Schneider said, “I do not foresee a major sale in gold. But this looks more like a slow deterioration in price,” she says.
The long-term target for gold prices is $2,400!
Michele Schneider expects the Fed to not hesitate in its support for the economy as recession fears begin to gain momentum in the second half of the year. Schneider says that although the economy is in fairly good shape, there are clear indications that employment has peaked. For the second half of the year and 2025 and beyond, Schneider states that any sell-off now will mark the bottom for gold prices. She also expects a long-term bullish trend, with prices then rising to $2,400. He expresses his views on this subject as follows:
I can’t say we’ll definitely see a hard landing, but at the same time I can’t completely rule out this scenario. If conditions deteriorate, I think the Fed would rather keep the economy moving than raise prices. That’s when you want to have inflation protection like gold.
Schneider says the Fed’s worst-case scenario would be a stagflation environment. That is, an environment of higher prices and slower growth. The strategist said, “Gold prices are trading volatilely. Because we don’t know what will happen. So you need to be patient and wait. “In general, I think it is better to prepare for a hard landing than to assume a soft landing,” he says.
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