Just because the gold market has had limited upside in recent months does not mean that investors won’t turn to the metal if things get dicey. The ongoing U.S./China trade war has taken a turn for the worse in recent weeks, and the war over trade could potentially take much longer to resolve than previously anticipated.
Both sides pushed away from the negotiating table. The U.S. raised tariffs on $200 billion of Chinese goods from 10 percent to 25 percent. China, as expected, retaliated by hiking tariffs on some $60 billion of U.S. goods. As of right now, a deal does not appear to be close.
The lack of progress hit stocks hard in recent weeks as it became increasingly clear that China is willing to walk away. Market volatility, as measured by the CBOE’s fear gauge, the VIX, saw a sharp increase as stocks saw numerous major declines. The recent sell-off could be a taste of what may be in store for stocks if a deal is not reached in the weeks or months ahead.
Perhaps not coincidentally, the CFTC recently reported that fund managers hiked their bullish positions in gold by 500 percent. Of note was the large increase in fresh longs entering the market even as prices were rising. This would seemingly be indicative of the metal’s attraction during times of economic or geopolitical distress. The fact is that investors have few, if any, alternatives.
As the trade war continues,
It could have a negative impact on the economic output of the globe’s first and second-largest economies. Any negative effects may also be seen at a time when both economies have already begun to show some cracks. The current economic expansion is getting arguably long in the tooth, and the effects of tax cuts and government spending are likely to wear off in the months ahead.
This could potentially force the Fed’s hand, giving the central bank ample reason to start cutting rates again. As the uncertainty over the economic forecast increases, investors may continue to pile into gold at a time when the dollar could be weakened through central bank action. The dollar has likely been a major roadblock to higher gold prices in recent months, but an increasingly dovish Fed could give the bears ammunition to take the greenback lower. This could potentially act as a major catalyst for the next significant rally in the yellow metal.
As a perceived safe haven asset,
Gold not only acts as a store of value with no counter-party risk but also comes with significant upside price potential. Once market dynamics shift further, it could see massive inflows as investors seek out alternatives. The time to get in, however, is before the crowd. In fact, the current economic and geopolitical landscape suggests that now may be the ideal time to start building a significant allocation. Doing so has never been easier.
Pick up the phone and speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have and can even show you how to build a sizable allocation using an IRA account.
Don’t wait for the next major stock market collapse or major recession before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: china, economic forecast, gold market, gold ownership, hiking tarrifs, safe haven, trade war, upside price potential, world economy