The gold market has once again started the New Year off on the right foot. Gold is seeing some solid buying interest to start the year as stocks and the dollar appear to be losing upside momentum.
Why might gold be trending higher in spite of stocks being near all-time highs, rising interest rates and a dollar at the highest levels seen in many years?
In our view there are numerous reasons that the yellow metal is likely to be bought at current levels. Here are three major possible issues that could potentially send gold much higher from current levels in the New Year:
The Trump Factor: America’s 45th President will be inaugurated this Friday. Although expectations are very high for the incoming administration, it remains unclear-very unclear in fact-if the new administration will be able to accomplish much of what it has campaigned on. Add to that the potential for a trade war and ongoing concerns over Russia, and you have the potential for a large exodus from stocks and risk assets. Investors are awaiting further details about the new administration’s plans, although the recent press conference did not provide anything new of substance with regards to how the administration will accomplish some of its objectives.
The Fed: It’s no secret that Donald Trump appears to be on the hawkish side of the ledger. The Federal Reserve just recently raised interest rates for the second time in a decade. The central bank’s so-called dot-plot is now forecasting three interest rate hikes for 2017. Although the notion of rising rates is considered by some to be bearish for gold, it is important to keep in mind that even with three rate hikes, rates would still be at very low levels. It is also important to keep in mind that it was not long ago that analysts called for four rate hikes in 2016, yet the Fed only saw fit to raise rates one time.
The EU: The historic vote by Great Britain to leave the EU, referred to as “Brexit,” could potentially be the first of more dominoes to fall. Great Britain has recently said that it wants completely out of the EU, and it remains unclear how this separation will affect both the U.K. economy and that of the EU as a whole. The Italian banks are in the news again as bad loans continue to pose problems for lenders, and even Deutsche Bank has been the subject of much speculation and anxiety. The Eurozone could potentially be the subject of much interest this year, and further issues in the region could potentially fuel risk aversion.
Any way you slice it, the bull market in stocks is getting old-very old-and the markets could potentially do a significant about face this year if expectations have been set too high.
Now may be the ideal time to consider ways to diversify using alternative asset classes. Hard assets like physical gold and silver may potentially provide a meaningful hedge against numerous economic and geopolitical issues including weaker currency values, inflation, deflation and more.
Gold and silver have seen a multiyear pullback that has potentially now run its course, and higher prices could potentially be in store.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold and silver ownership. Our precious metals professionals are here to answer your questions, and can even show you how to buy and hold physical precious metals using your IRA account.
Don’t wait for the next stock market collapse or for higher gold and silver prices before taking action. Explore ways to diversify with gold and silver today. Call us at 1-800-341-8584 to get started.Tags: advantage gold, brexit, deutsche bank, dot-plot, eu, Fed, gold, interest rate hike, trump inauguration, uncertainty