The gold market has seen a bit of a pullback from recent 6-year highs. The metal dipped under the $1500 level yesterday before bargain hunters stepped in today to propel the market back above this key level. Recent price action suggests that the market may be in the process of building a new base which could potentially act as a new, major level of price support. A series of higher lows also lends credibility to the notion that a firm uptrend is in place.
Recent price action in gold may also be indicative of how market dynamics are shifting again, and some major market movement may be seen in the months and years ahead.
Despite some recent volatility, stocks remain not far from all-time highs. The rally in stocks that has been going on for over a decade now may be largely attributed to central bank action including maintaining ultra-low rates and significant doses of QE. As some analysts have suggested that a top could be in place or near for equity markets, it should not be a major surprise that central banks are once again ready to keep the cash spigot turned on.
The notion of a fresh round of easing has put some calm back in stocks, and markets are now essentially betting that the Fed and other central banks will keep the punchbowl at the ready.
This form of monetary policy has some major issues. The first issue is that it may keep equity markets artificially elevated. Although this can, and has, worked, it can also lead to an eventual market collapse once the stimulus measures are removed. Second, such measures can have a significant impact on currency markets. It stands to argue, for example, that low interest rates and even a flood of fresh dollars hitting the marketplace would be bearish for the currency as the laws of supply and demand do their thing. With dollar demand constant or lower and supplies rising, price should decline. This, therefore, presents some key issues for investors.
The stock market will eventually see a major decline that could be 50 percent or more.
The dollar could also see a major decline as the Fed uses various tools at its disposal to fight the next major global slowdown. Lower stocks could potentially wipe out hundreds of billions in investor value, while a sharply weaker dollar will also sting as it erodes purchasing power.
These issues make it important, even critical, that investors make a significant allocation in alternative asset classes that may potentially outperform as the dollar weakens and as the next major stock market repricing approaches. There may be no better asset class to look to than physical gold.
Gold not only has significant and unlimited upside price potential but may also offer a key hedge against a weaker dollar, spiking inflation and numerous other economic and geopolitical risks. Adding this key asset class to your portfolio has never been easier, and perhaps never more important.
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 significant allocation using an IRA account.
Don’t wait for the next major stock market collapse or for a weaker dollar to erode your purchasing power further. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: cash spigot, central bank action, currency markets, decline, equity markets, gold action, low rates, market dynamics, market movement, monetary policy, price support, volatility