The first quarter of 2017 has ended, and the clear winner is gold.
Gold prices jumped 8.6% in the first three months of 2017, versus 5.3% for the S&P500 and 4.5% for the Dow Jones.
chartWhat is driving gold to rally harder than the biggest and best companies in America?
Let’s take a look:
Stock markets are in clear bubble territory with P/E ratios inflated beyond sanity
Housing market also in a bubble, just as interest rates are due to rise
U.S. debt soaring past $20 trillion
Possible government shutdown in late April, leading to U.S debt default
Continual policy tweaking and experimentation from the Federal Reserve
Political obstruction and chaos in Washington
Uncertainty over new administration’s ability to deliver on tax reform and infrastructure spending
Hedge funds and money managers selling stocks and adding to net long positions in gold and silver
Retiring baby boomers diversifying from stocks into safe-haven assets
Industrial demand for precious metals is strong and rising
Historic change to Sharia law now allows for Muslim investment in gold under certain conditions
Continued supply/demand imbalance with tricky mining outlook
The list goes on and on.
This is no reason for panic, of course. However, the list gives us all abundant reasons to be prepared and vigilant with our retirement assets.
SECOND QUARTER 2017:
THE EXPERTS TALK ABOUT GOLD
If the experts are to be believed, the second quarter of 2017 might be even more explosive for gold prices than the first.
Contrarian investor Marc Faber believes that both stocks and the U.S. dollar are totally overvalued. Faber does not think that the new president’s policies will be enough to fix the U.S. economy and save the stock market in the long run. According to Faber, as investors begin to see the significant risks with the U.S. dollar, the stock market and U.S. economy, money will flow hard into precious metals over the next three to six months.
In 2017, Faber expects the U.S. economy to stall and deficits to rise, causing the over-inflated dollar to weaken, stocks to tumble and precious metals to go ballistic. Investing in precious metals is protection from the dangerous combination of government debt and quantitative easing by central banks trying to fight off a global recession with near-zero interest rates, says Faber.
DailyFX senior market strategist Chris Vecchio remains bullish on gold, arguing that the precious metal has been especially resilient even in the face of a stronger U.S. dollar. Vecchio predicts that Washington, D.C. could be unable to pass funding legislation to raise the debt ceiling, causing the federal government to shut down as early as the end of April. According to Vecchio, a government shutdown would put strong downward on the U.S dollar, making gold even more attractive. Ongoing political risks and partisan gridlock are just too great to ignore.
Todd Colvin of Ambrosino Brothers says that macro concerns make him a gold buyer despite the Fed’s potentially tightening monetary policy. Colvin is especially focused on potential Fed actions for the remainder of the year. While the Fed has indicated that up to three rate hikes are possible in 2017, Colvin believes that the Fed is facing a great deal of market uncertainty they are not prepared for. If the Fed hikes rates fewer times than expected, that would be a bullish catalyst for gold. According to Colvin, stock market risk is also extremely high: so if markets begin to fall, the safe haven appeal of gold will increase quickly.
U.S. Global Investors CEO Frank Holmes recommends that investors have a 10 percent allocation to gold in their portfolio and rebalance once a quarter. In particular, he cites real interest rates (interest rates minus inflation) as a major factor supporting gold prices ahead. When real interest rates are negative, such as in the U.S. and U.K., gold rises in that country’s currency.
TIME TO BUILD YOUR LIFEBOAT FOR THE COMING STORM
Owning physical gold and silver is a form of diversification, a form of storing wealth, and a form of powerful stress reduction.
We live in a world with stock markets and housing poised to crash, political progress ready to be blocked, and hopes likely to be dashed all around. Precious metals investors can sleep better at night knowing that they have safe-haven assets on their side. The warning signs are everywhere, so investors must pay attention now more than ever to protecting their future and their family’s wealth.
Gold and silver have a 5,000-year history of value, portability and liquidity. Plus, gold gives a sense of satisfaction and peace of mind that no paper-based asset can. I encourage you to contact our friendly, expert precious metals team today. Please don’t wait.
