Trees don’t grow to the sky. What goes up must go down.
Sound like outdated advice to you? Not really. These are time-tested market truths for a reason.
Since Feb 8, both the S&P 500 and Dow Jones have been in full-on correction territory: more than 10% off a recent peak. The S&P 500 has not been stuck in correction territory this long since May 2008 – 10 years ago!
We hope this turns around soon. In the meantime, this punishment for stocks is a good reminder to get your risk profile under control before it is too late.
KEY DRIVERS FOR GOLD
Gold has been relatively stable vs stocks in 2018, showing how it can provide safe-haven diversification in a market storm.
There’s still plenty to think about if you want to keep your retirement account in shape in 2018:
Geopolitical Deterioration: Capital Economics analyst Simona Gambarini puts geopolitical risk as a big risk to stocks and a primary driver of gold ahead. She thinks any further deterioration in U.S.-Russian relations could boost gold demand quickly.
U.S. Dollar Weakness: Despite some uptrending this week, the U.S. dollar has been in a downward trend since early 2017. “Down remains the path of least resistance [for the dollar],” says Mike McGlone, senior analyst at Bloomberg Intelligence.
Inflation: Signs of inflation are all around us in everyday life now. According to AAA, gas prices are rising fast across the country. Housing prices in some cities are hitting historic highs with no end in sight. Our city of Los Angeles just hit its highest median house price ever, driving record homelessness levels.
Trade War: OCBC commodity economist Barnabas Gan says that the U.S.-China trade war is far from over. In his view, more escalation would have a “disastrous effect on the global economy…safe-haven demand will lift the yellow metal beyond $1,600/oz.”
U.S. Political Risk: Whether you are a supporter of the current administration or not, everyone agrees that today’s political climate is brutally hostile and provides a strong dose of potential uncertainty for global markets.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management says it’s only a matter of time before gold makes a convincing upside breakout.
If even two or three of the above factors ring true to you, then you owe it to your family to consider gold today.
DON’T FORGET ABOUT SILVER
While gold tends to get more attention, silver has the same safe-haven diversification features as gold. It also has a reputation for its critical uses in industrial processes that use a huge amount of the precious metal every year.
But is there a 50% rally ahead?
Bloomberg Intelligence thinks there could be. In a report issued this week, the research outfit said that silver tends to follow other industrial metals on a lag, which means silver could see a 50% price boost by simply “catching up.”
“Silver has plenty of room to catch up to the 50% rally in the Bloomberg Industrial Metals Spot Index,” the report said. “It’s been about 50 years since silver’s 12-month range was this narrow, increasing the likelihood of a sharp rally.”
The key catalysts Bloomberg sees? No surprises here: a weakening dollar, inflation, market volatility and geopolitical risk.
If you haven’t considered owning silver before, you might want to give it a look today.
THE MORE THINGS CHANGE…
Alas for our nation, nothing has changed to alter our current trajectory of geopolitical uncertainty. However, the “silver” lining is the positive support for gold and silver prices in this type of environment.
Washington, D.C. continues its dysfunctional ways, China and the U.S. are playing with fire with trade war threats, and the ongoing saber-rattling with Russia is troubling and not likely to end easily. North Korea is still a wild card on the world stage, changing course direction by the day.
Investopedia defines a safe haven as “an investment that is expected to retain its value or even increase in value in times of market turbulence.”
Sound good to you?
In a recent interview, famed investor Jim Rogers predicts significant market declines ahead and said “when people lose confidence in governments and paper, they always buy gold.
Seriously, how confident do you feel right now?