It seems like just a couple weeks ago that analysts were predicting gold to end the year at $1,650. But gold was already pushing that level late last week, as fears about the coronavirus and slowing business activity drove a wave of safe haven buying. Now analysts are predicting gold to rise to $2,000 within the next 12 to 24 months. At this rate, $2,000 gold within two years could even be conservative, as it seems that gold is building up a head of steam that will eventually result in all-time high prices.
So many people still seem to have their heads in the sand with regard to what’s going on in gold markets that it really boggles the mind. Yes, the economic slowdown in the US has been a long time coming, and yes it will probably be several more months before we hit the worst part of the next financial crisis, but the events have already been set in motion that will set off that crisis, and now we’re just in a waiting game.
The move to invest in gold today is the result of people seeing the writing on the wall and wanting to protect their investments. They may have benefited greatly from the last four years of the bull market in stocks, and they want to protect their retirement savings against loss.
The reason that stocks remain elevated is twofold. First, companies are still buying back their stocks, part of the trend that has occurred over the past several years that has helped juice stock markets. Second, more and more retail investors are seeing that stocks are near all-time highs and thinking, “Now’s a good time to get back into stock markets because they’re headed to the moon.”
As sure as death and taxes, you can guarantee that at the end of every bull market in stocks there will be hordes of individual investors clamoring to invest. They see stocks like Tesla go from $400 to $900 in less than two months and start getting dollar signs in their eyes. They see stock markets reaching all-time highs and think that it’s easy to make money in stocks. They hear stories from friends who have doubled their wealth in four years, and they get jealous and want to keep up with the Joneses. So they dump their life savings into stock markets right at the top of the boom.
Those are the investors who will lose their shirts. If they’re lucky, they’ll only lose half of their investments. If they’re unlucky, they could lose 80-90% or more.
Meanwhile, the investors who are getting out of stock markets today will benefit from gold rising to $2,000 in the future. They’ll look back at their decision to cash out and get into gold as the best investment decision they ever made.