The gold market has not given up much ground in recent days as the dollar index saw a significant bounce. In fact, the gold market has tested support levels in the mid $1260’s and has seen buying interest uptick and a bounce several dollars higher from that level. While this may, at a glance, appear to be nothing more than standard market “noise,” it could also be indicative of underlying strength in the gold market and perhaps even a split from the market’s correlation to the dollar.
While we believe that a weaker dollar could certainly still fuel buying in gold-as this make complete sense for a number of reasons-the days of gold weakening just because the greenback is stronger could be numbered. Why might this be the case?
Investors have become increasingly astute in recent years, and likely have come to the realization that global central banks may not have as good of a grip on the economy as previously thought. The ECB recently announced that “an ample degree of monetary stimulus remains necessary.” The ECB, like the Fed, is also dealing with subpar inflation rates. Inflation in the Eurozone is running about 1.2 percent, well below the central bank’s desired target of 2 percent.
And let’s not forget that by keeping the euro lower, EU exports may get a boost to assist in fueling economic growth. The same could be said for a weaker dollar, which can not only boost exports but also makes the country’s debt burden more manageable.
In other words, when it comes to key global currencies, the race to the bottom may still be intact. What could this mean for you and investors all over the world? Simple: a weaker currency can potentially make the cost of everyday goods and services relatively more expensive. Not only that, but a weaker fiat currency can also eat away at real returns…
Savvy gold investors may realize this and, therefore, may keep on buying gold in spite of any dollar strength.
Now is as an important a time as any before to include an allocation in asset classes that may potentially provide a hedge against weaker paper money. Now may be the time to consider hard assets like physical gold.
Gold has been considered a reliable store of wealth and value for thousands of years. Considered by many to be the only form of “real money,” gold cannot be devalued by central banks or default. Gold may potentially appreciate in value as paper currencies do the opposite and decline in value. If you do not have an allocation in physical gold as part of your overall investment strategy, now may be the right time to get started.
Adding physical gold to your portfolio has never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our account associates are here to answer any questions you may have, and can even show you how easy it is to incorporate physical gold in your IRA account.
Don’t wait for declining paper money to take a bigger bite out of your holdings. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, correlation, dollar index, ecb, exports, Fed, gold