Although gold prices are holding five-month highs, many investors are wondering if now is a good time to buy gold. I expect prices to continue to move higher and eventually retest last year’s highs.
Gold is up 12% since the beginning of the year and my opinion is that prices, still have the room to move higher, as ongoing global uncertainty supports the market.
Now is a Good Time to Buy Gold
There is a strong undercurrent of uncertainty. A crisis may dissipate quickly, but the general atmosphere of uncertainty will remain with us for a long time.
In particular, there is growing uncertainty in Turkey with the result of the referendum dividing the country further. At the same time, the UK prime minister Ms. Theresa May announced elections in a year packed with elections, Germany and France are also having elections and their result could change everything in the EU as Euroscepticism is growing.
Although gold is 12% higher since the beginning of the year, many fund managers, after years of complacency are now rebuilding strategic allocations in gold to act as an insurance policy.
Gold to Rally
I believe, the rally we have seen so far, is more than just safe haven buying. It is all part of a much bigger pattern. Gold should reach last year’s high of around $1375, with the possibility of reaching $1400 per troy ounce. Of course, it will take some time to break through the $1300 psychological barrier.
It will take some time to get there, but the longer it takes, the more sustainable the gains will be. I am happy with the progress the precious metal is making and I repeat this is still a good time to buy gold.
The Fed Policies Impact on Gold
Something else to note is that gold has not only reached nearly five-month highs, gold has also managed to see higher lows during key events: Federal Reserve monetary policy meetings.
Nevertheless, I will not be surprised to see markets sell off a bit, as investors will try to pocket their profits ahead of the June central bank meeting. This is not to worry, as market expectations are falling ahead of the meeting, and pricing is only a 42,3% chance of a rate hike. Last week’s expectations were well over 50%.
Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns, and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
Now, is not the time to abandon precious metal investments. Due to the euphoria caused by Donald Trump’s election victory, many investors are prepared to leave gold, silver, and other precious metal investments for the good old Dow Jones. I personally believe now is not the time to move away from safe-haven investments.