While there is a lot of uncertainty around markets right now, a good strategy is to go for relative value. Right now, gold reflects good relative value. That is, relative to other asset classes, gold looks the least risky in terms of valuation. There are reasons to believe that gold is readying for a major breakout. If that happens, the price will move higher, very quickly.
Right now in Australia, we’re getting low nominal wage growth and increased costs in about everything. That means many Australians are experiencing a reduction in REAL wages. Inflation is coming. It may not hit next month, this year, or even the next. But it’s coming. Which brings me to gold. When the market realises that governments and central banks will put up with higher than expected levels of inflation, it will start moving ‘insurance capital’ into the precious metal.
There is clearly some FOMO going on in global stock markets right now. That is, Fear of Missing Out. Missing out on what, though? Buying stocks on high price-earnings multiples at what appears to be the end of the cycle? The caveat here is ‘appears’. No one knows where the end of the cycle is. You just have to use your common sense.
Mining organisation Riva Resources has seen a massive decline of -99.61% in their shares during the month of December. What caused the share price drop?
Given the headwinds facing gold, it’s held up surprisingly well. The bitcoin phenomenon, bullish equity markets, a strong economy and rising interest rates are all traditionally negative for gold. Gold has had a pretty good year, considering. It’s trending higher and I think there is a good chance of it taking another leg up sooner rather than later.
Right now talk of bitcoin is everywhere. I can appreciate some may find it tiring. The reason the conversation has merit however, has nothing to do with the surging price. At least, it shouldn’t. The price is merely a consequence of the bitcoin architecture.
Apparently, when the French metro was being built in the late 19th century, The builders asked the local bakers to make a thinner, longer loaf that the men could break with their hands, allowing them to leave their knives at home. Et voila, the baguette came into being!
Australian gold miner shares fell after the US Federal Reserve´s meeting yesterday. As predicted, the Fed kept the interest rates on hold at 1%–1.25%.
If gold price breaks through US$1,370 it could indicate the start of a new long term uptrend. And this is why it’s rising. The real story behind gold’s rise — and the biggest financial story you’ve never heard of this year — is the declining US dollar.
The recent breakout for gold is bullish. It sets up the precious metals for higher prices longer term. But instead of buying into all the reasons why gold will go higher long term, it’s better to not even know. Ignorance is bliss.