Investing in Gold

Investing in Gold

investing in gold
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End of June 2020 the Western world is trying to recover from the COVID-19 lockdown. How much is the damage caused by the coronavirus and how this economic shutdown will affect the markets remains to be seen. Is there going to be a quick recovery, or there will be a recession? Where should I invest my savings now? Investing in gold now in July 2020 could be a good move.

The Stock Market is Inflated

When the market crashes you get a W move. Very rarely you will get a V move and yet, if we look at the economic numbers, they are catastrophic, but we are back to all-time highs. There has to be a reason for that and there is.

The central banks, Fed, ECB, and Asian banks have been pumping vast amounts of credit into the economy. That is what is pushing up equities. The market is telling us these market highs are due to a large amount of inflation, caused by liquidity the central banks have created. It is not the market rising, it is the value of money forming.

50% Inflation for the Next 5 Years

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The only reason stocks are so high is because inflation is coming. If inflation is on the way, where do you put your money? Many investors and financial experts say gold and rightly so. Most investors are small, they do not own large amounts of credit. However, billionaires, fund managers, and so on only have one place to put their money to get away from inflation and that place is equities.

We have seen equities so high because the central banks have baked in a 50% or maybe 100% rise in inflation over the next four to five years. In other words, the big money is trying to protect themselves from that inflation by going into equities which by definition will rise from inflation.

If you believe there will be deflation, all you have to do is to hold on to your cash. If you think inflation is on the way, cash is not useful because it will lose value. The Fed believes there is a strong possibility for a 50% to 100% increase in inflation over the next three to four years. That is a huge number and it will affect everyone. For example, if you are planning to take a holiday to an exotic location with your retirement fund, you will not be able to afford it. You will probably take a holiday to a cheap resort nearby. In a few words, your purchasing power will drop substantially.

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Business Collapse and Unemployment

Investing in Gold

Market bulls argue the market is already recovering. Shops are opening, factories are back in business, restaurants are opening too, stocks are holding up, and so on.

They are totally wrong. Unfortunately, unemployment levels are massive and still growing. Several airlines already declared bankruptcy. Some of them are Avianca from Colombia, Virgin Australia, Trans States Airlines from the US, Compass Airlines from the US, and many others. Rolls Royce announced 9000 job losses in the UK, Nissan shut down its Barcelona plant in Spain with 3000 redundancies, and another 25000 jobs were indirectly threatened.

In the US the news is not good either. The country has lost 20,6 million jobs since mid-March, resulting in an unemployment rate of 14,7% a level not seen since the great depression in the 1930s. I am afraid, there will be more business collapse and more unemployed in the following months.

The recession is going to be bigger than the 2008 recession. It will take years for the world economy to recover not months or weeks. The numbers are already massive and still growing. As I just said, the economy is not going to be back to where it was within a year that’s for sure. So why is the stock market still high? What is that’s still driving equity prices? It is the Fed’s liquidity.

Everyone is Printing Massive Amounts of Money

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The Fed and its proxies are doing it one way or the other. They are squeezing people out of the bond market indirectly, by enabling certain parties to buy equities, support the market, and support liquidity.

It is important to support equity prices because that supports employment, supports the middle class and it also supports the rich. In addition, it is also important to support the property market because it supports the middle class.

If you let stocks, bonds, and property go down you will have an economic collapse. Anyhow, we already have an economic collapse and this is called unemployment. The Fed and the government are propping up the rest of the economy by printing money, which is exactly what governments did for hundreds of years, to deal with similar issues. Pumping money into the economy and in the end creating inflation. In fact, inflation has always been the end result.

Inflation isn’t going to be a US economic issue. It will be a world economic issue as the rest of the world is also printing and pumping money into their economies. For example, the Europeans have decided to pump almost 3 trillion euros to aid their economies.

Covid-19 is Coming Back

I am afraid our COVID-19 struggle isn’t over yet. There is already the second wave in the US and the markets are already distressed. From 18,000 infections a day a week ago, we are now to a record 40,000 infections a day. That will add more strain to the weak economy, as there will be an extension to lock down in many states across America.

Nonetheless, there is not going to be a second lockdown, not in the States and not in the rest of the world. The reason for that is that nobody can afford it. A second lockdown will take us back to the stone age. Western democracy cannot operate with lockdowns, as lockdowns diminish tax revenue. The state cannot support its social policies. (welfare, education, public housing, health, and so on.)

Support the Real Economy

Investing in Gold

Every time countries cannot raise tax money, they print it and that leads to inflation. The Fed will argue that a 50% inflation over 5 years is nothing to the economic meltdown that was coming and that is partially correct.

I would argue that the Fed shouldn’t be throwing billions of dollars into stocks. Last week the Fed injected over $60 billion into the markets. That is a massive amount of money to spend in a week’s time. There will be a time when easy money for equities will not be around and then equities will take a dramatic downturn. Supporting the stocks is vital, but only up to a point. What is more important is to support the real economy out there. The real economy is real jobs, real growth, and prosperity for everyone.

The Fed will continue to print money throughout the year and this will continue for 2021. The Fed also will not raise interest rates for the next couple of years as their quantitative easing policy is well on track.

Gold Offers Stability and Growth

Volatility is the new reality for the market. At this time gold and silver can offer, stability, protection, and growth. Gold has always had a strong second half of the year. We’ve seen it over and over again for gold, to finish the year with a good rise. The yellow metal is expected to move higher. It is already building nicely at the moment but I do not expect gold to get over the $2000 mark this year. Gold is expected to do well in 2021 as well. Beware though, gold is weak before any elections, we might see gold slowing down in Autumn.

Geopolitical tensions always give gold a boost. The Chinese Indian border clashes, the North Koreans are back and Turkish ambitions in the Mediterranean Sea could drive gold’s price further. I would also like to mention silver. At the moment I consider silver a good investment.

Moreover, I would like to mention bitcoin. For me, bitcoin is digital gold. You can buy it fast and sell it fast and you can have it in cold storage virtually in your basement.

Final Words

Credit expansion and monetary stimulus are driving the market into new highs even though, we are in the middle of a covid -19 caused recession. We are seeing the stock market not follow the economic downturn. The market is now addicted to never-ending credit, is asking for more and getting it. Inflation is coming, we expect at least 50% inflation for the next 4 to 5 years. But, there will be a time when easy money runs out, and then, things could get ugly.

A prudent down-to-earth investor always has a percentage of his portfolio invested in gold to protect his savings from inflation, economic crisis geopolitical tensions, and so on. In these uncertain times, gold is a good bet to safeguard your life savings from the economic recession.

 

Gold Rally Delayed but Gold will Bounce Back

Gold Rally Delayed but Gold will Bounce Back

Gold rally delayed but gold will bounce back
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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.

No Reason to Sell Gold

No Reason to Sell Gold

There is no reason to sell gold, as the outlook for gold prices remains positive. All indicators are bullish on gold.

  1. There is no end to the trade war between China and the United States.
  2. The bond yields will continue to fall.
  3. Brexit uncertainty still rising as the Tories lose parliament support.
  4. The economic outlook is getting from bad to worse.
  5. The global debt bubble.
  6. The covid-19 effects on the global economy

Gold Consolidates

No reason to sell gold
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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

No Reason to Sell Gold
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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.

No reason to sell gold
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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.

When Will Silver's Price Rise?

When Will Silver’s Price Rise?

When will silver price rise

As gold consolidates around the $ 1,500 mark, investors are turning to silver and all investors are wondering when will silver’s price rise? Silver already enjoys a year’s high, but compared to gold, still has a long way to go. If we take into account that gold enjoys a six-year high, to silver’s one year, then yes silver has a lot going for it.

When Will Silver’s Price Rise?

The truth of the matter is that silver has been consolidating for a number of years together with gold. Gold broke through this year and made some of the lost ground. On the other hand, silver’s breaking was not anywhere near gold’s. As a result, the gold-to-silver ratio is 88 at this moment.

Gold, silver’s rival, is consolidating at around the $ 1,500 mark right now, but it still has the potential to move higher. As long as the large economies around the world fall into recession, the trade war between the United States and China, the possibility of a no-deal Brexit, the troublesome Italian Banks, the civil unrest in Hong Kong, the German Economy’s slowing down, the United States economy slowing down, Turkey is just about to turn its back to the west and join Russia. You will have to be mad not to own gold and silver.

Right now the US and the German economies are still vibrant but all economic data suggests both economies are slowing down. The recession will hit both countries in 2020. That’s my humble opinion.

Recession Is Coming

If all hell breaks loose (no-deal Brexit, Italian Banks collapse, US-China trade war deteriorates, etc.) then there is no doubt, the recession will be as bad as the 2008 recession.

when will silver's price rise
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However, the Fed, the European Central Bank, and Japan’s central Bank are all ready for the recession. They are prepared to do anything in their power to ensure the recession will be mild. At the moment they are considering ways to inflate the money supply. The lowering of interest rates by the Fed and the quantitative easing by the ECB will do exactly that.

If you are going to engage in the precious metal market, then silver is the way to go. The gold to silver ratio has dropped from 93 to 88 so the momentum is there. In my opinion silver at $17,10 per ounce is dirt cheap.

According to Peter Hug, Kitco’s global trading director, the demand for silver in Hong Kong is much stronger than the demand for gold. The Chinese are adamant, that silver is currently undervalued.

If gold reaches $1600 by the end of the year, then silver should be between $18,50 to $19,00. Nevertheless, the silver-to-gold ratio will drop, one way or another. I think the when will silver’s price rise question has been answered.