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.
