The chart above speaks volumes. An unprecedented combination of financial, political and economic trends is causing gold and silver prices to rise while other markets go nowhere. Gold is up over 25% and silver up over 40% in just six months.
In addition to the ongoing chaos and fear caused by Brexit (including a major leadership shakeup in the UK), we have uncertainty about the upcoming U.S. election and slowing global economic growth led by a faltering Chinese economy. The recent dramatic run up in precious metals is not surprising.
Mervyn King, the recently retired Governor of the Bank of England, noted the pace that central banks, governments and individual investors are now buying gold. In the first quarter of 2016 alone, central banks and investors bought a staggering 727 metric tons of gold… more than we’ve seen in years.
When uncertainty reigns supreme, gold is a means of payment that everyone is always prepared to accept.
Brexit Risks Still Impacting Markets
The pound, the euro and equities all around the world have taken a beating In the recent investor rush to safety after Brexit. The money has gone primarily into “safe” U.S. Treasuries, causing new dangers to a fragile global economy. The charge into the dollar is less a vote of confidence in the U.S. economy than an escape from major problems facing other advanced economies.
While a strong dollar might sound good at first, it also makes U.S. exports more expensive, threatening our shaky economic recovery. For emerging markets with weak political systems, a strong dollar can trigger investment outflows and further undermine their economies. For the European Union (EU), a weaker euro feeds doubt about Europe’s ability to stimulate economic growth after years of austerity, lack of political coordination and intractably high levels of unemployment.
Financial analysts can see the writing on the wall:
HSBC just upped its assessment of precious metals to “mildly bullish.”
Goldman Sachs lifted its view on precious metals to “Attractive” from “Neutral.”
Robin Bhar, Head of Metals Research for Societe General, said: “We expect [gold] prices to rise to $1,400/oz, with follow-through strength extending to the rest of the precious metals sector.”
Zev Spiro, CEO of Orips Research, said “Gold is going to $1450/oz.
A Devaluation Lesson
With all the currency devaluation going on around the world, as well as the continuing pressure of inflation, it is a good time to look again how gold performs against currencies and inflation over time.
According to data provided by the U.S. Bureau of Labor and the U.S. Dept. of Statistics, $100,000 in 1974 would be worth less than $20,000 today. This is a decrease in purchasing power of more than 80%.
Conversely, an item or service that cost $100,000 in 1974 would cost over $487,000 today, an increase of almost 500%.
If you purchased $100,000 of gold in 1974 at $63 per ounce, it would be worth $2,103,174.60 today. Need I say more?
To protect your retirement account and savings, we strongly suggest diversifying your portfolio and owning physical gold and silver. Investors are running out of places to hide that are not influenced by political turmoil, bureaucratic incompetence and the limits of monetary policy. But gold is one of the few assets you can own that you control, that protects against devaluation and is not influenced by political meddling.
Protect your Retirement with Gold Coins
While we could do without all the bad news, the fact remains that bad news can be good for gold. And there is more bad news to come as globalization has been called into question with Brexit and the markets continue to tread water or run aground completely.
Owning physical gold delivers the peace of mind and security no stock, bond or other paper-based asset can give.
