Gold Is Taking A Breather
Fed promised to keep interest rates lower for longer, increased liquidity and its asset purchase policy to include corporate and municipal bonds have caused stocks to skyrocketed to dot-com-bubble-like valuations. And now, the Fed wants inflation to run higher to make up for lack of growth. ... Importantly, a lot of the first round of stimulus money – which started going out five months ago – still hasn't been spent yet and they are talking of more stimulus to come. Democrats and Republicans are to about to approve another 500b to 1 trillion fiscal stimulus policy if the current negotiation goes through.
More money printing as a form of payout will devalue the U.S. dollar and makes poor people poorer, whether they know it or not... leading to more calls for handouts.
That is why as far back as June 2019 , I have urged investors to own "hard assets" that will increase in relative value as the value of things priced in U.S. dollars goes down.
That concept is key to understanding how to protect your portfolio against inflation. Hard assets are things like gold, silver, property, art and cryptos.
The world only contains so much of these physical assets and when inflation is stoked by unlimited printing of fake money Gold and Gold companies will benefit.
Since hitting a new high of more than $2,070 per ounce in early August, the price of gold has retraced 10% and traded in a small range around $1,950 for the past month. It's trading up about 1% today, hovering around $1,965 per ounce as I write
When an asset retraced from high and consolidates within a 10% range it's a bullish signal. and that's exactly what gold is doing right now.
The dollar has been weak in recent months and if continues to go down it will be another catalyst for gold .
Interestingly, Warren Buffet a long-time ‘critic’ of gold for having no utility, has invested in Barrick Gold (a gold mining company) this time around.
Here some reason Warren Buffet is invested in gold:
§ Gold serves as a defensive play
§ A safety hedge against the dollar in the event the dollar collapses.
Another reason behind Warren Buffet move could be that precious metals are known to do well during the very late stages of the market cycle often right before a market correction.
On the chart, Gold’s price action is bullish stay above is uptrend channel and supported by the 50 Days moving average
Gold is at an inflexion point , its worth keeping a close watch.