iGold

Silver continues to wind and grind its way toward a major multi-year low. The chart pattern is increasingly clear for those with the proper perspective. Unfortunately, over the short-run, silver is doing what it tends to do best: frustrate the majority of investors into abandoning the sector, just at the wrong moment.

As in the other major lows which have occurred over the subsequent decade, many will be caught unprepared for the next wave of the advance when it occurs, due to the human tendency to only follow markets which are moving sharply higher. In reality, the best time to be following and investing in a market is when it is grinding into a support zone, so as to be positioned when the next wave manifests.

This is exactly where the silver market finds itself today.

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Gold Price Forecast – All Eyes on the Fed

All eyes are now on the Federal Reserve meeting this Wednesday at 2pm eastern time.

Why is the pending meeting so important?

Because the Fed is expected to announce the tapering of its $120 billion per month bond buying program, which began at the onset of the Coronavirus pandemic last year.

Exactly how much of a reduction in bond buying will the Fed announce?

We cannot be sure yet; however, the mainstream consensus is that a reduction of $10 – $20 billion per month for the coming 1 – 2 quarters is likely.

Bond Taper and Gold Price

It is important to remember that the US Federal Reserve has no actual reserves with which to buy bonds in the first place. Any “bond buying” is a euphemism for printing-money, or the electronic equivalent thereof.

Bond buying is thus inflationary, because the Fed creates money out of thin air with which to purchase the bonds, which subsequently suppresses interest rates below true market values.

A tapering from $120 billion per month, to, for example, $110 billion or $100 billion, is thus relatively less inflationary than if the Fed had kept its bond buying program at current levels.

Generally speaking, less inflation is seen as a negative for gold, and conversely, positive for the value of the US dollar.

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Gold is trading within a giant consolidation pattern. We will look for clues as per which direction the consolidation will eventually resolve based on two key trigger levels: a break above $1,917 would signal a continuation of the 2015 – 2020 bull market, whereas a failure at $1,610 would mean a multi-year bear market is still looming. What our analysis thus shows is that gold should be expected to trade within a nearly $300 range for the foreseeable future, with a much larger move pending within 12 – 18 months.

Let us examine the relevant resistance and support levels for more detail on the range of outcomes:

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