February 19, 2018

GOLD RALLY

BY Tradition Gold

Gold has been on a tear since last week. Given the massive market upheaval that had occurred BEFORE last week, it was rather surprising that gold hadn’t rallied yet. Tradition Gold, however, believed that a strong move up in gold was coming.

U.S. Dollar

In our last post we made several prescient calls on the direction of gold. In case you missed it we said, “The recent declines for precious metals has partly been driven by a rally in the U.S. dollar, with the $DXY, a measure of greenback against a half-dozen rivals, rising about 1.5% for the week. As you can see in the chart below, there is a persistent bid in the US dollar, which would be its sharpest weekly gain since November 2016. How does this affect the price of gold? Foreign currencies are weaker relative to the US dollar, making them more expensive for those buying with the weaker monetary units. What else can we see on the chart of the US dollar below? Although the most recent move is up, thus bad for gold, the overall trend is most certainly down. Of course, in the long run this is good for the price of gold.”

We went on to say, “(Gold) shows the very strong rally from the $1,240.00 level to $1,365.40. The latter price, the recent peak, was at the high of September 9th. Weakness there is normal. What else do we see? Gold is coming back to the recent highs of $1,310.00 to $1,300.00, which should offer great support. So based on the normal chart levels, buying gold here looks quite good.

Since then, gold has gone up $55.40 per ounce in just seven days. Did you invest at the right time? Did you add gold to your IRA to protect against the market’s wild gyrations?

Inflation

The US dollar, equities, and gold weren’t the only markets moving a lot over the past two weeks – Treasuries were as well. Yields spiked and the market began to fear a comeback of inflation. So as we would expect, one of the market’s oldest and best inflation hedges appears to be in the early stages of a comeback.

Chris Gaffney, president of EverBank World Markets said in a CNBC interview, “We think that it is a good time to own the precious metals. We are seeing a burgeoning middle class and more disposable income in India and China, which should lead to more physical demand. At the same time, the volatility on the equity markets really has people looking at alternative assets that can hold their value in times of market turmoil.”

Gold tends to perform best during periods of rising inflation, as investors look to precious metals as a store of value. With a strong economic outlook, market volatility and nascent signs of inflation, the Fed is likely to bump rates multiple times in 2018.

Many analysts are expecting another shoe to drop, which will stoke instability and fear again. So if you have been waiting for a good entry, for a good time to add gold to your IRA, we believe that now is the time.