3 factors driving recent record highs

00:03 Speaker A

Gold prices are on a tear, pushing to new highs as investors weigh government gridlock, a shifting Fed and central bank demand. Joining us now is Blue Line Futures Chief market strategist, Phil Streible. Phil, great to see you as always. Let’s talk about this rally in gold, uh, Phil. What what is what is driving that rally, Phil? What what are the key reasons as you see it?

00:33 Phil Streible

Yeah, and it’s been an incredible rally and it’s really we’re setting up for this fourth quarter. The momentum for gold has been truly remarkable. It was a 10% increase in September, a 45% increase year to date, and it’s positioned here for one of the biggest annual gains since 1979. So if you look at over the past few quarters here, we’ve seen factors where we have declining growth, economic growth, we’ve got rising inflation. So it creates a clear stagflationary environment and that back tested is one of the best economic environments for the gold market.

01:07 Phil Streible

We’ve also got a weakening US dollar and really anticipation that the Federal Reserve interest rate cuts could really kick it a high gear and that’s where the foundation and the groundwork that puts where gold futures are today.

01:21 Speaker A

What what are you seeing, I’m curious Phil, in terms of of ETF flows?

01:26 Phil Streible

Yeah, that’s been a big thing. That investor enthusiasm is really reflected with a 16% increase in gold ETF holdings this year. More individuals, more institutions recognize gold and cemented as a position of strength within their portfolios. So they’re looking at as a diversifier. You’re seeing even, you know, large financial institutions like Bank of America recommending that traditional 64 40 portfolios are broadened out and they have some exposure to gold and it’s been back tested and it shows that adding different elements like oil, adding gold, adding miners, adding things like this to traditional portfolios tend to work as a diversifier and it benefits in different economic environments.

02:10 Speaker A

All right, now take out the crystal ball, Phil. Tell me what you see ahead for gold. Anals at Goldman, now they told their clients they expect 4,000 by mid 2026, Phil. They did outline an upside scenario, 5,000 by the end of next year, but what do you see?

02:29 Phil Streible

So the reality is is that, I mean, gold futures they they came up under $3900 and if you look at the average true range, it’s been moving $50 a day. This thing could hit 4,000 by the end of the week if it really wanted to stringing together two normal days upward at the moment. If you want to play devil’s advocate on it, you want to look at what are the potential risks to the bull market because that’s what I would be focused on. When you have these incredible run-ups, you always want to kind of have one foot out the door.

03:00 Phil Streible

You look at, we’ve identified several key factors that investors should be aware of. You’ve got recently, we’ve had better economic data, everything from second quarter GDP, consumer spending, personal income have all come out better. We do have this this government shutdown which has shifted the prospects of interest rate cuts. Now we’re back at like a 96% chance they cut 25 basis points. But you look at the dollar index, the dollar index has been consolidating sideways. If we start to get a series of higher lows on that chart,

03:31 Phil Streible

we also get treasury yields, if they begin to rise along with improving economic data, you could see gold futures settle back. So I’d be looking at, hey, where are the key levels to support? And it’s really 3750, 3660. So you want to monitor those in conjunction with, you know, where gold prices are at, where we expect them to go and look at the drivers.

03:47 Speaker A

Quickly, Phil, I only have about 30 seconds left, but we’ve been talking about the yellow metal. What do you see with silver?

03:53 Phil Streible

Strong correlation to gold. The ETFs they did cut the last three days. It was mostly profit taking as we run up and get closer to $50. Physical demand has really been lagging, industrial demand hasn’t been there. The mining supply and the growth, that’s been really offline. So it’s just been a lot of the ETF flows that have brought it to where it’s at and the conjunction and the correlation to the gold market.

04:14 Speaker A

Phil, always great to see and to have you on the show. Thank you, sir.

04:17 Phil Streible

Thanks.