Gold prices have risen over 27% in 2016, buoyed by a host of factors. But one factor in particular has been something special to watch: investment demand.
Investment demand for gold is the strongest it has been in more than 30 years.
Year over year growth is equally remarkable. According to a second-quarter World Gold Council (WGC) report, investors purchased a total of 450 tons of gold, a sizable 25% increase when compared to the second quarter of 2015. This growth includes both institutional and retail buyers of coins and bars, as well as exchange-traded funds (ETFs).
We’ve discussed here many of the reasons why these investors have been flocking to gold: diversification, negative real interest rates, stock market “toppiness” and more.
This time, we’ll let the experts weigh in on their reasons why:
WHAT IS DRIVING SUCH INTENSE INVESTMENT DEMAND FOR GOLD?
Juan Carlos Artigas, World Gold Council’s Director of Investment Research, argues that investors are favoring gold because of negative-yielding global bond markets and ongoing geopolitical uncertainty. Artigas sees nothing on the horizon to change his bullish outlook. He thinks central banks have a long way to go to normalize interest rates and the growing Chinese, Russian and Indian markets will support higher gold prices in the years ahead.
This summer, Credit Suisse predicted that gold could rise to $1,475 in the fourth quarter of 2016. The bank just reaffirmed this bullish outlook for gold, citing robust ETF purchases and the sobering fact that 39% of sovereign debt traded with negative interest rates at the end of July.
Bob Haberkorn, a senior commodities broker with RJO Futures, thinks that flat U.S. retail sales and continued softness in the Chinese economy could mean upside for gold.
Gerald Celente, founder of Trends Journal, believes gold could benefit whatever actions central banks take at this point: if they raise rates, anemic economies will suffer more while housing and stocks tank, but if they lower rates, currency depreciation and money outflows will ensue.
Craig Ferrantino, president of Craig James Financial Services, expects gold to reach $1,800 by the end of the year. He identifies rising cyber crime as the “Mr. Robot” effect that could do incredible damage to the global economy in the coming years. Combined with recent acts of aggression by China and Russia, he thinks market uncertainty is here to stay.
Author and precious metals specialist Diego Parrilla recently described the current environment as a “perfect storm for gold” due to three closely related trends:
Quantitative easing and negative interest rates are dramatically distorting the valuation of government bonds;
Central bank policies are incentivizing risk in the stock and credit market, further fueling speculative bubbles;
Failed central bank policies are putting relentless pressure on fiat currencies and paper-based assets.
According to Parrilla, “monetary policy without limits will lead to a very wild and bumpy ride and a larger crisis than the one we have been trying to resolve.”
OWNING GOLD MAKES MORE SENSE NOW THAN EVER BEFORE
With the world as it is today, every retirement investor has to keep a realistic view of the way things could be headed from here. It is hard enough to imagine what life could be like after the November 2016 elections, let alone five to ten years in the future!
You might hope for the best, but you should always plan for the worst.
Our politicians and central bankers clearly do not have the right plan to turn around our national debt crisis and stagnant wages and declining living standards here in the U.S.A. Hopefully they will someday, but in the meantime you always have gold!
Even if you aren’t ready to buy today, do yourself a favor and pick up the phone right now and talk to one of our highly trained IRA Specialists at 800-462-0071. There’s no obligation, and you can learn more about how to protect your family now and down the road. We can position your portfolio for the best chance of success no matter what tomorrow brings.