A “perfect storm” of bad alternatives and increasing overall global risk will continue to push gold higher well into the future, say analysts.
MarketWatch reported last week the World Gold Council (WGC) is forecasting continued bullish performance for gold, indicating the precious metal is profiting from a confluence of factors that have created “fewer viable…alternatives” for investors.
Analysts attribute much of this predicted price climb for gold to anemic demand for what were once the most bulletproof of assets—government bonds, in this case Japanese government bonds, which have suffered under the growing trend for negative interest rates. Worldwide investors are losing confidence in such “unconventional monetary policies,” and are falling back on gold to hedge risks in their portfolios.
The WGC reports the shiny metal is experiencing a twenty-eight percent increase in 2016, outperforming almost all other asset classes. Even former gold skeptics are feeling pushed towards the precious metal and, says the WGC, that impetus is coming from central bankers’ ever more improvisational policies. “Central banks are increasingly throwing all they can at global economies to stimulate growth.”
One can hardly argue the point; the European Central Bank has recently hinted it may expand its stimulus effort, apparently waiting only to see if the Fed finally moves on interest rates next month. Meanwhile, the Bank of England just announced emergency measures in the face of Brexit, including cutting interest rates for the first time in seven years, and a new round of stimulus set to inject £70 billion ($92 billion) into their reeling economy. Even so, England’s central bank expects 250,000 Britons will suffer layoffs in the wake of the EU departure.
Even gold ETFs, derided by investors who prefer the physical metal as “paper gold,” have surged, adding six-hundred thirty metric tons ($25 billion) through July 31. Their total global holdings now amount to 2,240 metric tons. The WGC contends since that figure still falls below 2012 numbers; it suggests there’s room for additional volume. (While this may be great news for brokers and others who get their cut off the top, woe betide any small ETF gold investor who thinks he holds actual physical metals.)
MarketWatch also cites experts at Market Anthropology who find the dollar index (DXY) to be “stretched,” suggesting a setup for additional gold gains. They suggest with gold’s spectacular performance so far this year, its September, 2011 high of $1,924 is a record ready to be broken soon.
So the news is good almost all around. If you’re already holding gold there’s a significant upside that has yet to be explored. And if you’re looking to acquire it, we’re currently seeing prices that make it an excellent opportunity. But if you’re holding nothing but paper, that “perfect storm” is still out there, hunting for victims.