Gold Markets Showing Strength
Posted By | February 2, 2016
In our previous article, we pointed to the growing demand for gold as investors worldwide recoil from the volatile stock markets. According to Bloomberg Business, the stock markets have lost about $15 trillion since last May. The lure of gold as a safe haven has caused big speculators, such as hedge funds, to double up on their gold positions over the last week, a sea-change from the bearishness that persisted at the start of the year. Gold holdings in exchange-traded-funds (ETFs) are growing at the fastest velocity in a year, and gold-related exchange-traded products (ETPs) have spiked higher in 2016 by $3 billion.
Well, here's what’s happening?
We think it’s obvious: People are waking up to the escalating risks in the conventional financial markets – stocks and bonds – and are looking for investments that show little correlation to the equity and debt markets. What we’ve known all along is now becoming common knowledge – gold is an excellent investment when times are uncertain and a great store of value at any time. Those who kept the faith during the long bear market for gold are now reaping their rewards for the patience. More importantly, many new investors are piling into gold and the other precious metals, driving the gold price north of $1,100 an ounce (and, we think, on its way to at least $1,200 over the next year, maybe considerably more).
Evidence of New Demand For Gold
Also according to Bloomberg Business, gold futures have gone up about 4.4 percent in January, which is the largest monthly increase in the last year. There were almost 2,000 managed-money net-long contracts in futures and options for the week ending January 19, more than double the long positions of a week early. Compare that to the net-short position of over 24,000 contracts at the end of 2015. Add to this gold rush the $1 billion of new money in precious metal ETFs so far this year, and gold ETP holdings rising to more than 1,500 tons!
The money pouring into gold is smart. It sees China’s economy falling into despondency and its currency getting flabby and weak. Oil staged a brief fake-out rally, just a blip in the continuing bear market that have commodities markets spooked and stock markets fearing deflation, recession or worse. It looks like the Federal Reserve is going to think long and hard before raising interest rates again, another plus for gold. The bottom line: we believe gold should always play a role in your investment portfolio. In our opinion, holding physical gold in a self-directed IRA is one of the best ways to go. Let Augusta Precious Metals set you up with a Gold IRA so that you can benefit from today’s gold rush.
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