Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Now Is the Time to Buy Gold

Commodities / Gold and Silver 2017 Jan 05, 2017 - 03:12 AM GMT

By: John_Mauldin

Commodities

John Grandits : The Fed finally raised its target interest rate and issued guidance for 2017. Trump shocked the political world and stocks seem to be making new highs daily. Investor sentiment is at two-year highs, fueled by optimism for renewed economic growth, de-regulation, and tax cuts.


Meanwhile, the mood is decidedly negative toward gold.

Mainstream media sites like Barron’s and The Financial Times are claiming the end of the recent bull run in gold and have a very bleak outlook.

From Barron’s:

Gold is struggling. The election was supposed to increase market volatility and push investors to safe assets. Volatility has risen, but investor sentiment has shifted toward hopes of better economic growth through fiscal stimulus, tax breaks, and infrastructure investing.

With one of Trump’s central economic themes being the need to increase infrastructure investment, industrial metals and the stock market in general have fared better. In contrast, gold is this year’s worst-performing metal.

Modestly stronger US economic expansion and the potential for a rise in inflation propelled by Trump’s spending plans already are setting the tone for more Federal Reserve rate hikes next year. Translation: more downward pressure on gold prices.

With gold bordering on bear market territory—down nearly 20% from its peak earlier this year—now is the time to make a precious metal investment.

As hard as it may be, if you’re a long-term investor seeking additional portfolio insurance or capital preservation, you now have the opportunity to buy what very few other investors want.

A Missed Opportunity

Investors watched and listened closely all year to Janet Yellen and other Fed representatives pontificate about the economy, monetary policy, and the direction of interest rates. After forecasting as many as four interest rate hikes in 2016, we wound up with one. In the process, gold went from $1,050/oz. to well over $1,300/oz.

Investors who waited patiently for sub-$1,000 gold prices were left at the proverbial station as the gold train took off. As gold performed strongly in the first half of 2016, many potential buyers kicked themselves for not taking a position earlier.

The Turning of the Tide

Gold looked poised to move even higher on election night as Trump’s victory became more certain, but markets quickly reversed course and investors are bidding US stocks to record levels. The market’s reaction to Trump’s election hasn’t been seen since Ronald Regan’s defeat of Jimmy Carter in 1980.

The Dow Jones Industrial average is up over 15% and small cap US stocks, represented by the Russell 2000, are up over 22% year to date, with the bulk of the move coming recently. US financials, represented by the ETF XLK, has risen 23% since the election, and the US dollar vs. a basket of other major currencies is the strongest since 2002.

Meanwhile, safe-haven assets such as treasuries have fallen out of favor, experiencing sharp declines. The 10-year US treasury yield has surged 40% since November 1 and gold has declined nearly 15%.

History doesn’t repeat itself but it often rhymes.

Forecasting the Future

If you think the Fed will raise rates three times in 2017—and the new administration will smoothly usher in changes to boost economic output and corporate investment—then perhaps increasing or maintaining significant exposure to stocks is the right strategy.

Stock investors are currently pricing in a very orderly implementation of tax cuts, deregulation, infrastructure spending, and more advantageous trade deals by the new administration.

But if you think there’s a chance of rising volatility, heightened geopolitical risks, or a myriad of other risks such as sovereign bond default by a member of the European Union or an emerging market country, then adding to or initiating a precious metal investment is warranted.

And while it appears Janet Yellen’s position as Chairwoman of the Federal Reserve is safe through February 2018, I would not bet against her resignation or possible early removal if Fed actions are not conducive to the new administration’s agenda.

Strike While the Iron is Hot

The mainstream media may be bullish on US stocks right now, but the US is entering a very uncertain period. With the stock market in its second longest bull market ever, investors should position themselves accordingly.

If you wanted to buy gold late last year, but didn’t because you thought prices would move lower, this is your second chance—but it won’t last forever.

Gold has corrected 20% over the past few months, and 2017 could be a replay of 2016—where the Fed postpones rate hikes amid tepid economic growth and turmoil in other parts of the world—putting gold back in favor.

Free Ebook: Investing in Precious Metals 101: How to buy and store physical gold and silver

Download Investing in Precious Metals 101 for everything you need to know before buying gold and silver. Learn how to make asset correlation work for you, how to buy metal (plus how much you need), and which type of gold makes for the safest investment. You’ll also get tips for finding a dealer you can trust and discover what professional storage offers that the banking system can’t. It’s the definitive guide for investors new to the precious metals market. Get it now.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in