Gold is back in a short-term Bull mode with prices creeping up from $1,500 over the last 3 days of trading.
The Big picture
A lot could happen, but it is looking good.The problems causing renewed interest in gold as a hedge and as a safe-haven have no clear resolution.
There are now 5 major trends are in place that are acting as Bullish catalysts for gold trades. Combining them has an amplifying effect.
We have talked about a lot of this but we, and many others as well tend to pick out a single aspect at a time.
New gold discoveries are hitting record lows. Just the price to mine gold has skyrocketed 412% over the last decade.With only 5% of mines actually panning out.
Gold is being squeezed so much, that a price explosion is imminent. And that is only 1 reason for gold to jump.
I have four more catalysts to show you, and they are the following:
First up, we have the newly dismal interest rate outlook. A 2nd cut that the Fed had not considered just months ago is all but baked into the market. The US isn’t alone there. Europe’s constant struggle to mask weak economies may lead to headline fatigue, but it is very real. Nearly $17-T of bonds are in negative territory, and this is where almost all the action on that front can be found.
2nd, the trend is complex but will keep it short and sweet. Trade wars between the #1 and #2 global economies are not going anywhere. They have not gone anywhere in years now. They will not go anywhere for years to come.
3rd, this trend goes hand-in-hand and should be pulled out from the 2nd. Even without its exposure to the US market weighing on it, China is going through a long-term growth problem. Banks are loaded up on bad debt. A shadow debt market is even worse and even harder to get data on. The country depends on outdated and dirty industrial operations that are renowned for treating workers badly. Banks and financial companies are forced to prop these up, along with making sure the sky-high urban property markets does not deflate. And the easy economic expansion days are long since over. Going below 7% growth used to seem like a “canary in the coal mine.”
Now it is 6%. It will be 5%. It will be 4%. The question is how long that takes and if the entire propped-up system to finance this can down-shift without the gears exploding.
4th, then we have the rest of the world. The US is at odds with Iran andhalf the Middle East. Global energy is clearly a new front for “asymmetric warfare” and/or terrorism.Just on the trade front, India is probably getting pretty tired of us.
Canada and Mexico are as well but they have to play ball longer because of their sunken costs in the old NAFTA.
Plus we are seeing rifts only widen with most of Europe, as most of Europe is seeing rifts growing between each country and the rest of Europe. All right as a messy BREXIT could completely ruin a financial scheme that sees a lot of personal and corporate capital flow through London.
Finally, and most importantly, people are just buying a lot of gold. Individual investors yes, but institutional investors and central banks as well. Central banks purchased a record amount of gold 1-H of this year. China, Russia, and Poland seem to be leading the charge. All told, central banks accounted for nearly 1/6th of total demand.With the market volatility, geopolitical turmoil, and dire warnings from just about every reputable source on a slowing global economy, where do you think that goes from here?
Will there be pullbacks?
Of course. Some will be the day-to-day or week-to-week market sentiment and hype. Or just some profit taking,but think about that. The markets seesaw between trade tensions easing and escalating between the US and China. Yet the countries are not even talking to each other in a meaningful way.
Do not mistake the churn for the trend.
A whole lot has to turn around to flip the script on gold now. And, we have all seen, there is no 1 who is willing, or potentially even able to do that any time soon.
With stock market valuations still sky high, everyone is looking for thenext big thing.
So, just maybe they should take a serious look at 1 of the oldest asset sectors around, gold. The potential profits are staggering.
The experts say that a balanced portfolio should contain 10-15% in physical gold.
By Adam English
Paul Ebeling, Editor
GLD, XAU, gold, stocks, asset, portfolio, demand, supply, mines, profits, trends, bullish, trade, debt, BREXIT, warfare, terrorism, bull, Fed, interest, rates,
The following two tabs change content below.
Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.
Latest posts by Paul Ebeling (see all)
- The 5 Safest Cities in the World - October 13, 2019
- Box Office: ‘Joker’ Laughs with another $55-M in North America - October 13, 2019
- US Q-3 Earnings, Here They Come - October 13, 2019