Retirement investors have experienced nothing but gut-wrenching volatility in recent weeks with looming fears of potential trade wars, a White House in turmoil and punishing scrutiny on the technology sector.
Now arguably one of the stock market’s most famous investors – Jack Bogle, founder and retired CEO of Vanguard — is saying that this is the most volatile market he has ever experienced.
In 66 years of investing!
A quick glance at the charts shows the brutal truth he is describing: in 2018, both the Dow Jones Industrial Average and S&P 500 have fallen into correction territory. The S&P is down over 6% in the last month alone!
On the other hand, true to its status as a safe haven asset, gold has returned about 6% in 2018 so far.
In the last month alone, where stocks got crushed, gold is up over 1%.
Bogle writes, “I have never seen a market this volatile to this extent in my career (only 66 years… I’ve seen two 50-percent declines, I’ve seen a 25-percent decline in one day and I’ve never seen anything like this.”
The S&P has already tripled the number of 1% swings we endured last year. Just last week, investors saw stunning intraday turnarounds as fears of a trade clash between the U.S. and China gyrated in dramatic fashion.
UBS Financial Services Managing Director Art Cashin says this year’s market volatility is reminiscent of the 1987 market crash and it’s been a bumpy road. (On October 19, 1987, the Dow Jones Industrial Average fell 22 percent in a single day.)
Nuveen managing director Stephanie Link confirms that this is a big year for volatility. Link notes there were 28 days in the first quarter alone when the market has moved +/- 1%, compared with only eight times in all of 2017.
Why all the turmoil in the markets? Link says today is a time of uncertainty globally… and the market doesn’t like uncertainty.
WHAT DOES THIS MEAN FOR GOLD PRICES?
When the stock markets get volatile, retirement investors tend to look for alternatives.
BMO Capital Markets’ Colin Hamilton is bullish on gold because of escalating tariff tensions, volatile markets and an inflationary environment. He also points to strong, sustained physical investment in gold in China and India. Hamilton believes retail buyers will increase their allocation to physical gold as a hedge.
Holmes expects understated inflation and strong demand from China and India to help boost gold prices to $1,500 and of an ounce by the end of the year. All that demand could outstrip supply too, In fact, the World Gold Council has estimated that world supply of gold has peaked.
Blue Line Futures president Bill Baruch thinks gold will have a big second half of the year and he predicts the yellow metal to break out above $1,400 sometime before August or September. Baruch says the dollar is going to be a catalyst and the trade war can also be a big potential boost.
Bloomberg Intelligence commodity strategist Mike McGlone recently wrote that “gold is poised to break above resistance.” Backing up his opinion, he cited signals from the Federal Reserve’s recent policy and rising inflation combined with a declining dollar.
A WEAK U.S. DOLLAR IS GOOD FOR GOLD
The U.S. dollar has declined in two of the first three months of 2018. If history foretells, April could give us more of the same pain.
A fascinating study from Intermarket Strategy’s Ashraf Laidi just found that April has traditionally been the worst month of the calendar for the dollar index over the last decade and beyond.
This year, April also coincides with probable renegotiations of NAFTA, which could further pressure the dollar.
CMC Markets analyst David Madden writes, “Gold was given a lift by the soft U.S. dollar. The inverse relationship between the markets is holding up.”
The value of the dollar and the value of gold reflect the new realities coming out of Washington, D.C. – policies many believe will revive inflation and the investment in prices.
With stocks going up and down in unpredictable, yet always painful, spasms of turbulence, investors are looking for safe havens.
DO YOU HAVE YOUR SAFE HAVEN STRATEGY IN PLACE?
You don’t have to be a “gold bug” or even an expert in all the trends supporting gold prices to understand the diversification power physical gold can have in your IRA or safe.
Jack Bogle has never seen such treacherous stock market conditions, which could lead to a lot of heartburn for you no reason, if you don’t act soon. Every investor should consider owning physical gold as a hedge in these uncertain times.
Trade wars are dangerous and the first casualty may be your financial future. A weaker U.S. dollar is a positive development for the gold and another strong argument for allocating some of your portfolio to precious metals.
Act now to make sure your family’s financial future is safe!