Gold's Biggest Risk Yet? Trader Called Bottom, Reveals Next Breaking Point | Gary Wagner

Gary Wagner (0:00)

When crude goes up, it affects everything. It's a huge factor in terms of the ability to cause havoc vis-à-vis inflation taking higher. And because gold thrives during a period in which inflation is increasing and the fact that we've seen the dollar go lower, it's really the perfect environment. They're absolutely moving in tandem.

The correlation is really high.

David Lin (0:32)

Suppose we had an event where gold falls back towards $4,000, perhaps even breaks below $4,000, which would be psychologically important. What would that be?

Gary Wagner (0:42)

First it would be...

David Lin (0:44)

Gary Wagner is back. He's the editor of thegoldforecast.com. He's going to give us his gold forecast right now. And importantly, what will be moving, not just gold, but the entire market's going forward. Key economic variables and metrics to watch.

Welcome back to the show, Gary. Good to see you.

Gary Wagner (0:59)

Thanks for having me. Interesting time. So it's great to be on.

David Lin (1:04)

Yeah. Strap in everybody. Gold's at $4,400. 4448 is the latest number on my screen. We're speaking on Wednesday, September 9th.

Right before the CPI report comes out tomorrow morning on Thursday. So by the time this airs, I think we'll get the CPI report. Market's waiting for this report. The Fed's waiting for this report. You told me off line how important inflation is for not just the Federal Reserve, but also for other areas, including body loads. Now, what is going to happen likely over the next, I'm not asking you to give us a prediction for the print for tomorrow, but just inflationary trends for the next two prints.

Gary Wagner (1:39)

Well, we don't know how that number will come out tomorrow. What we do know is that oil has spiked up tremendously over the last couple of weeks. I think that the cash market Brent actually kind of touched near $100 a barrel. We haven't seen that for quite some time.

Futures is just below that. But because of our dependence on oil, when crude goes up, it affects everything. Of course, it's a huge inflationary pressure, but it's a huge inflationary pressure across the board. It's not just energy costs or gasoline and things like that.

So much of our products that we produce and sell in Canada and here are produced using petroleum. So it's a huge factor in terms of the ability to cause havoc vis-a-vis inflation taking higher.

David Lin (2:44)

Okay, Gary, this is what the market is expecting. So we have PPI out on Thursday September 10th and CPI on September 11th. The Fed Watch is core PCE, but they monitor all other inflationary measures as well. So the previous is the last column and the actual forecast is the column to the left. So the market is expecting at least on Friday CPI to be to be higher. The forecast is 0.4% on a month-to-month basis. Whereas the previous month's growth was 0.1%.

Year-to-year, but the market is expecting 3.4%, which is in line with the previous month. So the market isn't expecting higher gasoline and diesel prices to filter into the economy yet, at least not for the August print. Keep in mind that gas just started shooting up this time. And sorry, the last week and a half, really.

Before I flip over to my screen, I just want to ask for your outlook on what the Fed is going to do. Given that the latest surge in diesel and gasoline have probably not yet been factored into this past month's CPI report, which will come out this week, do you think the Federal Reserve is likely going to stay put with a Fed hike by next week, which is the FOMC meeting?

Gary Wagner (4:00)

I believe there is a very high probability that the Fed will actually raise rates. It's the one tool that the Fed has to try to address inflationary pressures because that slows the economy down and therefore it reduces the potential for inflation to spike higher faster. And so absolutely, I think that the Fed's looking for it's still got a couple of key numbers coming out. The CPI, I believe, is on the 10th and the PPI is on the 11th, I believe, if I've got that right. And the thing is, they are coming out this week. The Fed's going to meet next week. So those are the last hardcore reports that will come out prior to the Fed holding their open market committee meeting. I think that it's already ingrained or it's accepted if you look at the FedWatch tool.

That's been moving up steadily. I believe it now could be at about 60%.

Maybe a little higher. I didn't look this morning yesterday. It was close to that. And what the FedWatch tool does is they actually have Fed, the Federal Reserve goes out and polls traders of interest rates like bonds to get a real indication on where yields are going. And that puts heavy weight on that. And crude oil is really the underlying theme right now, because it has sparked much higher than it was. And as you said correctly, it's just been recently, but it did start about a week ago. We'll look at that when we pull up a chart. But crude oil has been effectively moving up now for a week, week and a half. And it's hitting the potential to challenge $100 a barrel, if it continues in this direction with the same type of movement, price movement that we've recently seen.