In the last few days, we’ve seen gold trading below the $1500 mark. Yesterday though, gold’s price dropped just above $1465 per troy ounce. We see the gold rally delayed but gold will bounce back.
Gold Rally Delayed But Gold Will Bounce Back
It seemed as if the market was overbought and a number of other issues affecting gold’s price seemed to defuse. Firstly, the Europeans offered to accept a delay in the Brexit deal, which helped the pound gain 400 pips. Then, the news from the Fed meeting in September, indicated the possibility of another interest rate cut will be off the table. And last but not least, the trade talks between the United States and China were looking better.
Therefore, the worn-out market was not met with great enthusiasm from the investors who were reading that gold at $2000 and silver at $25 was imminent. Yesterday’s gold’s and silver’s performance was a negative surprise for gold investors.
Bullish Gold Again
Although the gold market doesn’t look good, the fundamentals are there for gold to become bullish again. The global recession is imminent, the stock market bubble is real, the European Central Bank will continue its negative interest rate policy and the Fed will follow with even lower interest rates too.
Conclusion
Gold’s price will go up, but it will not be on a straight line. Gold and silver prices might drop even lower, (gold could get as low as 1400) but in the end, gold will go up because, the fundamentals are all there. Remember, investing in gold is a long-term investment, and no investor is lost in the long run. Nevertheless, the gold rally delayed but gold will bounce back.
The economic outlook is getting from bad to worse.
The global debt bubble.
The covid-19 effects on the global economy
Gold Consolidates
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In my mind, gold will consolidate for a while as the formal withdrawal of the Hong Kong extradition bill, will remove fear from the global markets. Also, in Britain a bill is about to pass that will forbid a no-deal Brexit. These two events will remove fear from money managers around the world, as they will see fewer risks coming out of Hong Kong and Britain.
As a result, gold will consolidate for a while until the various central bank meetings take place in September. Central banks will continue their monetary policy as it is, we all know that. In fact, Christine Lagarde, the next president of the European Central Bank, already announced the continuation of Mario Draghi’s policies regarding quantitative easing and negative interest rates.
Silver Soars
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Silver soars like there is no tomorrow, surpassing each of our target prices of $18,00 and then $19,00. On top of that, the silver-to-gold ratio has fallen from 90-1 to 79-1 and we expect the ratio to continue to narrow, while gold and silver continue rallying. Remember, it is widely accepted that the gold-to-silver ratio should be at around 60-1.
Recession is Coming
According to Frank Giustra, the chairman of Leagold, we are heading for a recession worse than the one we had back in 2008 and I agree with him.
Global debt has actually doubled since the 2008 crisis. In fact, global debt value was fueled by “cheap” money such as quantitative easing and low-interest rates.
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The overpriced and overvalued Stock Market has also been fueled by massive amounts of easy money. The Stock Market has been moving up for an unusually long time and as a result, people have become accustomed to that type of behavior. They think this will keep going on forever, which is not the case and in the end, they will be hurting themselves. A thirty percent fall in the markets will be normal to see.
No Reason to Sell Gold
We are long overdue for a recession, as this was the longest economic recovery ever. If we take a better look at the recovery we’ve seen, it was a fragile anemic recovery. The growth we’ve seen all these years was nothing more than 2% or 2,5% annual growth, compared to 5% and 7% healthy recoveries in the past.
If the bad scenario takes place, we could see massive unemployment, large corporation collapse, currency war, hyperinflation, and geopolitical uncertainty.
Conclusion
Although, a serious investor should always have some insurance in his portfolio, and the only insurance is gold, nowadays it will be reckless for an investor not to own gold. As the bad news continues coming in, many investors increase the percentage of gold in their investments. The best gold investment for me is to possess physical gold.
Silver too can be handy, as it is undervalued-underpriced and it also has the gold-to-silver ratio distance to cover. Furthermore, silver tends to follow gold as it rises and as it falls. A physical ownership of silver is always a better investment.
There is absolutely no reason to sell gold whatsoever.
