If you've held physical gold for the past five years, you've likely been frustrated by its lack of price appreciation. Of course, physical gold always retains its value as sound money and wealth "insurance," but while prices of paper assets have flourished since 2013, the dollar price of gold has languished. That, it seems, is about to change.
At long last, gold, silver and all commodities appear poised for a price breakout in 2018 (and beyond) as the lower dollar, price inflation and higher interest rates that so many expected in 2010-2011 finally come to pass. In addition to those factors, several gold-specific positives have recently appeared, and they demand your consideration:
- Global gold demand is strong, with the only restraining component being western investment demand. Since western investors are typically trend followers, you'd expect low investment demand to appear at price lows. This is exactly what the recent Gold Demand Trends report from the World Gold Council showed when it was published earlier this month: https://www.gold.org/research/gold-demand-trends/g...
- Traditional technical and cycle analysis also augurs for a price bottom and trend change. Respected market analyst Tom McClellan recently declared the current cycle to be upward for gold, with the next three years providing some unusually strong price gains. You can read more of his analysis here: https://www.themaven.net/mishtalk/economics/eight-...
- In late 2017, many investors began to think of Bitcoin and other "crypto-currencies" as alternatives to gold. But with the recent sharp price correction and looming legislation to regulate (or even ban) crypto trading, the investment world is realizing that cryptos are not a replacement for a sound money strategy of holding precious metal. Instead, they are at best a supplement to a diverse portfolio.
- And the long-term price chart certainly looks constructive for a breakout and rally over the next 12-24 months. As you can see below, once price exceeds $1400, the stage will be set for a move toward $1525, and once above there, a move toward the old 2011 highs should be right around the corner.
So, how should one look to prosper from this coming rally in price? Of course, there are many forms of "gold exposure" available to investors today, but none of them come with the safety and peace of mind of owning true, physical gold.
Consider the following:
- Unlike the fiat currency of Canada, the US, Europe and elsewhere, gold has been considered sound money for millennia. It stores and retains wealth, while fiat currency is consistently degraded and devalued by the issuing central banks.
- Physical gold has no counter-party risk. Simply put: if you hold it, you own it. The same cannot be said for hypothecated paper assets like stocks, bonds and mutual funds. In paper assets, the holder always assumes the risk of the counter-party's solvency. With physical gold, this is not an issue.
- And while the financial world has been relatively stable since 2013—and counter-party risk has been brushed aside—the action thus far in 2018 should remind you that this concern is never far away. For example, consider the recent stock market correction and demise of several volatility-related ETFs and ETNs.
- Physical gold can either be held personally or in a safe, secure storage facility. Either way, it is your asset, and it provides an insurance policy against financial calamity. You can learn more about precious metals storage here: https://www.sprottmoney.com/media/six-top-countrie...
- The only real risk that a gold investor assumes is authenticity of the gold itself. Recent news articles have demonstrated the value of working only with reputable dealers selling officially-produced bullion products. By adhering to this strategy, an investor can eliminate any doubt regarding the quality and purity of his or her holdings.