KITCO NEWS - Gold moved higher Friday morning on news that former White House National Security Advisor Michael Flynn pleaded guilty to lying to the FBI. While equity markets slid on the news, Peter Hug, Global Trading Director for Kitco Metals, thinks that overall, equities have priced in an overly optimistic scenario.
"I still think the jury is out on that call," Hug tells Kitco News, referring to tax cut plans going through and the Fed aggressively tightening into 2018. "I'm still not convinced that the tax reform will get that type of growth that they're anticipating, and I don't think the Fed will be as aggressive in 2018, as some analysts are suggesting."
While Hug sides with consensus on the Fed going ahead with rate hikes at their next meeting in two weeks, he disagrees with analysts forecasting three to four hikes next year, unless "there's really some significant uptick in growth in the U.S. economy and we start getting more fiscal stimulus out of the Trump Administration."
Hug says that the market is currently extremely nervous. "The slightest things that can go wrong in the market, possibly Trump being implicated in the Russian investigation, hammered the stock market 350 points." He warns investors that frothy market conditions are "absolutely the time to hold insurance."
For traders, Hug suggests a range of $1,265 to $1,297 per oz. for gold. "There may be some selling into that level ahead of the Fed meeting coming up in a couple of weeks, but I think 1,265 is a key level to hold for the short term. On the upside, gold really needs to close above the 1297 to have the integrity to move and stay above the 1300."
February Comex gold futures settled the day at $1,282.50 an ounce, down less than 0.5% from last Friday.