Why Gold???
Stocks, commodities, and other currencies can be quite vulnerable when it to changes around the world. This can include any geopolitical developments and economic stress. In opposition to these, gold is considered to be a safe haven because it does not have a counterparty risk. The world can dramatically shift and change and Gold will not falter because of its unique properties and the constant ever-present demand for the precious metal. Gold is not known to buckle under pressure. Gold will power straight through inflation, deflation, US dollar fluctuations, economic uncertainty, and geopolitical stress. In times of trouble gold should be your go-to asset for trading.
The Fed’s Decision to elevate the Interest rates this December finally came to light and the raise was a quarter-point. So what will happen now regarding the precious metal GOLD?
Over the past year or so, investors expected that the Fed would soon hike interest rates off near-zero. They turned to gold and triggered higher prices in many other asset markets like long-term bonds, fine art, and collectibles of all sorts.
However, learning from history, we should expect both rising gold prices and rising interest rates over the next few years. This is exactly what happened back in the 1970s, during which the price of gold rose from $35 an ounce early in the decade to over $850 an ounce by January 1980.
The previous time the Fed raised interest rates was in 2004 to 2006. During these years the Fed funds rate rose from one percent to five-and-a-quarter percent and gold prices soared from under $400 an ounce to over $700 an ounce, which is a 75% increase!
Gold may be out of favor on Wall Street but not on the Main Street, nor across Asia. Led by China and India, private-sectors continued buying gold in all its kinds, including small bars and bullion coins.
Number of central banks, including China and Russia, both of which wish to reduce their exposure and reliance on the U.S. dollar, have continued to make large-scale purchases over the past year. The strong physical demand for gold simply has not been sufficient enough to keep gold prices steady. While institutional traders and speculators have continued to short the metal, selling tons of “paper” gold in the futures and comex markets.
On the other hand, higher interest rates will likely undermine the much over-valued stock and bond markets – touching off a rush into gold by the same players who were eager to sell the metal in the past few years.
We need to keep our attention on Wall Street and the reaction of equity prices to the Fed’s shift in interest-rate policy. A period of day-to-day gold price gains and simultaneous declines in the broad stock-market averages could be evidence of a shift in investor attitudes away from stocks in favor of gold, signaling a new era for the yellow metal.
So why trade Gold?
• In the last decade, the price of gold has risen 300%, while the purchasing power of the dollar has declined by more than 25%
• During inflation, currencies can lose value while precious metals have historically retained their value.
• Gold bullion is often seen as a potential hedge against inflation.
• The value of precious metals is recognized across most cultures and geographies, making it essentially a borderless currency.
• Secure your wealth from economic crises, governments printing money, and uncertain times.
• Precious metals are prized for their rarity and beauty today, as they have throughout recorded history.