Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Who Knows What Will Black Gold Do in Coming Week? - 18th Dec 17
Gold’s Shooting Star and Its Implications - 18th Dec 17
UK Used Car Christmas From Dealers Buying Discount Sales Bargains - 18th Dec 17
How To Play The 2018 Cannabis Boom - 18th Dec 17
Should You Consider Investing/ Buying Gold or Bitcoin? - 18th Dec 17
Gold EFPs: Absolute Proof that the Paper Gold Price is a Fraud - 18th Dec 17
Gold – Technical Obfuscation, Fundamentals, Predictions - 18th Dec 17
Stock Market Final Thrust is Likely - 17th Dec 17
Never Mind Tea Leaves, Here’s a Strong Signal from the Economic Dashboard - 17th Dec 17
As Bitcoin Breaks All-Time Highs Near $18,000 Its Future Has Never Been So Uncertain - 17th Dec 17
Best Time / Month to Buy a Used Car From a UK Dealer - 16th Dec 17
Relief Rally in Gold Mining Stocks - 16th Dec 17
Amid Bad Fundamentals, Gold Sector Rally May Have Begun - 16th Dec 17
Gold Bullish on US Fed Interest Rate Hike - 16th Dec 17
The LORAX Explains What Happened to Sheffield's Street Trees 2017 - 16th Dec 17
Bitcoin Trading Alert: Bitcoin Pauses – Will Appreciation Follow? - 16th Dec 17
SanDisk Ultra 128gb 100mbs Micro SD Card for Smartphone's Speed Test - 15th Dec 17
Inflation is Spiking Globally… Bond Bubble Bursts in 3… 2… - 15th Dec 17
Sheffield's 'Real' LORAX Defending the Trees From the Labour City Council Patrol Units - 15th Dec 17
Stock Market Decline Signals are Near - 15th Dec 17
Santa Is Putting Christmas On The Blockchain And Saving Billions - 14th Dec 17
The Unprotected, the Protected, the Vulnerably Protected Classes—Which Are You? - 14th Dec 17
Gold’s Upside Target - 14th Dec 17
Year-end US Interest Rate Hike Again Proves To Be Launchpad For Gold Price - 14th Dec 17
2 Charts That Might Define the Fed’s Jerome Powell Era - 13th Dec 17
UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - 13th Dec 17
Stock Market Elliott Wave Forecasts - Is the World coming to the end? - 13th Dec 17
A Method Traders Can Use to Confirm an Elliott Wave Count - 13th Dec 17
Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - 13th Dec 17
A Former Wall Street Veteran: Good Traders Are Born, Not Trained - 12th Dec 17
Buy Gold, Silver Time After Speculators Reduce Longs and Banks Reduce Shorts to Continue? - 12th Dec 17
Masters of Economic and Political Illusion – in Taxes, Debt, Government, and Markets - 12th Dec 17
Approved Used Land Rover Main Dealer Real Customer Buying Guide - Hunters, Chester - 12th Dec 17
Gold Price 100% Bullish Signal - 12th Dec 17
Epic Stock Market & Fixed Income Bubble Will Not End Well - 12th Dec 17
Bitcoin can be stolen. Although Can’t be hacked - 11th Dec 17
Have Stocks Reached A Permanently Rigged Plateau? - 11th Dec 17
Trying To Beat The System Is A Fatally Flawed Investment Strategy - 11th Dec 17
Is This The Beginning Of The Next Silver Rush? - 11th Dec 17
The Dow Gold Ratio - 11th Dec 17

Market Oracle FREE Newsletter

Traders Workshop

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

© 2005-2018 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

Catching a Falling Financial Knife