Despite gold's corrective pullback Monday, analyst at ETF Securities Mike McGlone says gold may be setting itself up for further gains post the Fed decision.
McGlone said many bearish factors that have been
weighing on the yellow metal may now have disappeared. Those included: the record setting stock market rally, overly optimistic Fed
tightening expectations, the strong US dollar and the substantial
decline in crude oil prices.
The analyst noted he is not surprised the Fed did not increase rates since the economy
is not ready to withstand tightening.
"The primary reason for the Fed to
raise rates is to suppress inflation and inflation expectations but the
greater risks remain towards disinflation or deflation. Declining
commodities, declining stock prices and the strong US dollar are
deflationary forces," he continued.
McGlone suggests it may also be positive for gold investors to monitor the U.S. stock
markets' next moves because, based on historical data, the metal may be
poised for some gains.
"When gold peaked in 2011, it was near $1,900/oz. while at the same time the S&P 500 bottomed near 1,200. Now in 2015, gold is near $1,200 and the S&P 500 is near 1,900. The levels basically transposed since 2011. The risk is that these markets continue to revert- potentially back to near 1,600," he noted.
