Gold, silver speculation may ease after Fed clarity: Hugh Johnson

Synopsis

Precious metals saw a sharp overnight rise. Market strategist Hugh Johnson notes global uncertainties are shaping these moves. He advises caution on gold and silver, suggesting speculative demand may ease. The US dollar is under pressure. Johnson expects a steady Fed chair pick, likely Kevin Warsh, who understands central bank independence.

Precious metals experienced a sharp rise overnight, prompting questions about whether the rally will continue or if profit-taking is imminent.

Hugh Johnson, market strategist, described the recent moves as part of a larger story shaped by global uncertainties. “We have moved a long way, and momentum has started to fade. We are waiting for a potential new Fed chair announcement, which could bring clarity on the Fed and US economy,” he said.

With speculation mounting over President Trump’s pick for Federal Reserve chair, Johnson cautioned against expecting drastic rate cuts. “No one really thinks the Fed will follow Trump’s calls for deep cuts. If it did, credibility would be lost, treasuries would suffer, and that would hurt growth and equity markets,” he explained.

On gold and silver, Johnson urged caution. “We have seen huge moves. Supply and demand fundamentals aren’t strong, and safe-haven flows into commodities have driven the rally. If the new Fed chair signals steadiness, speculative demand may ease off,” he noted.

The US dollar has also been under pressure despite strong fundamentals. “The dollar has weakened because the US is not being seen as a safe haven like before. Euro strength and Japanese elections also play a role. Euro-dollar could reach 122,” Johnson said.

Regarding investment strategy, he emphasized careful selection. “We are late cycle, and everything has rallied together. Focus on where we see value, as markets could become more volatile,” he advised.

Finally, on the Fed chair pick, Johnson expects a familiar, experienced face. “It looks like Kevin Warsh, a former Fed governor, will be the next chair. He has credibility and understands the importance of central bank independence,” he said.

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