Gold Is Looking More Bullish As Goldman Sachs Upgrades Gold Expectations to “Outperform”
As the stock market teeters on correction mode, gold is looking more bullish. Goldman Sachs even upgraded gold outlook this week. The investment bank expects precious metals to “outperform” over the coming months. This is based partly on empirical data that shows gold outperforming after four of the last six interest rate hikes. With the Fed promising more rate hikes this year, it looks good for gold.
Last week the Dow entered correction mode. This also has prompted gold prices to move higher as investors start looking to safe havens. The Dow was back and forth this week, but some analysts are warning of as much as a 30% correction.
On Monday, gold hit a 5 week high over $1,350 continuing its rally from last week. Gold prices held strong through the week, with some resistance Thursday as the stock market managed to recover and trade in the green. Gold stayed over $1,320 though, and safe haven buyers took the dip as a buying opportunity. Silver followed trend.
What this means for investors: Continuing trade war fears also kept gold’s rally going this week. As the gold bulls finally start seeing significant potential for gold prices, it’s a perfect time to buy. Dips like Thursday’s are an even better opportunity. Furthermore, gold has been posting over 10% yearly gains now for the past few years, so it’s no surprise gold is finally breaking out.
Gold Has Best Run So Far Since 2011
Gold accomplished just something that hasn’t happened since it’s run in 2011. It posted its third consecutive quarterly gain, with gold up between 1.6 and 3.1% over the last three quarters. The rise has been coming even as the Fed raises rates.
What this means for investors: Furthermore, global buying is picking up as well. Everything from inflation to politics to Fed policy to an overweight gold market is looking bullish for gold right now.
Three Reasons Gold Is Going to Climb
Other than stock market correction, there are three other important reasons that gold is looking more bullish.
Inflation. Inflation is trending up right now, and it seems to be rising faster than expected. Higher inflation is always bullish for gold prices.
Weaker dollar. The dollar has shown incredible resilience for the past couple years, but it’s strong run looks like it’s coming to an end. Even President Trump and Secretary of the Treasury Steve Mnuchin have been quoted saying the dollar needs to weaken. A weaker dollar is better for trade, and with the new tariffs that the President has imposed on imports and threat of counter tariffs by key trade partners, trade will be an incentive for a weaker dollar policy.
Politics. Geopolitical events almost always trigger gold prices to climb higher as well as domestic politics.
What this means for investors: Some are even predicting gold could hit $1,500 or more this year. As the graph here shows, gold prices have actually crushed the markets so far this century. Precious metals certainly go through corrections and bear markets, but in the long run, they always keeps value.
The Gold Supply is Falling
A lack of gold could eventually be another reason that gold prices could go up. Mine supply of gold seems to be peaking out, and new discoveries are not occurring at the same rate as they used to. Looking forward several years, the supply is expected to tap out even further.
What this means for investors: Gold is a finite resource, and only so much of it can be taken out of the ground. When supply of any good declines, prices go up.
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