Three Big Reasons Why Gold Price Could Break Above 2011 Highs
New York (Aug 27) From its highs of the year at around $1,370.00 an ounce, gold prices are down roughly 3.5%. With this information, investors are asking if that’s all for the rally that began in gold prices in early 2016.
I warn you; don’t be too quick to jump to conclusions; gold prices could go much higher. There are three factors that investors should pay close attention to and, as it stands, all three suggest that, if you don’t pay attention to gold prices now, you could be kicking yourself later.
One of the biggest reasons to be bullish on gold is the central banks’ reckless monetary policies. As it stands, there are five central banks that are implementing negative interest-rate policies (NIRPs), and many other central banks are keeping the rates near zero or lowering them. Mind you, these interest rate conditions are expected to remain for a very long time.
Investors must understand this, and it’s very critical; negative or low interest rates essentially mean that money has no value. When this sort of phenomena occurs, gold really becomes helpful to store wealth. Don’t be shocked if investors start buying the precious metal as they realize that low or negative interest rates are here to stay for long time, and they see their wealth decline severely.
The other factor that no one is really talking about is the disparity between the demand and supply in the gold market. To say the least, the most basic fundamental equation of gold prices is broken, in favor of bulls.
The demand for the yellow precious metal is surging. We continue to see robust buying from central banks, consumers like India and China, and mints around the world—which suggests that there might be a gold rush in play.
On the supply side, if you look closely, you will find that the major gold producing regions are slowing down. In addition to this, over the past few years—due to low gold prices exploration—spending has been slashed. This will only create trouble for future production. Also, you have to keep in mind the amount of paper gold that has been sold. In the vaults, there isn’t enough gold to cover a situation in which investors take delivery.
This is “Economics 101” here; as demand soars and supply suffers, gold prices could skyrocket.
Last but not least, another reason to be bullish on gold is the uncertainty in the global economy. We continue to see major economies suffer. Pick a map and point to a major country, and chances are it is struggling to show growth.
Take the Japanese economy, for example; it keeps failing to report growth. The Japanese government and the Bank of Japan have tried some extreme measures. Sadly, nothing seems to be working.
Know that when uncertainty increases, gold provides a safe haven.
Gold Prices Outlook 2017 And Beyond
Here’s what investors must know: don’t pay too much attention to the gold prices on a daily basis. Staying focused on the long term could pay big-time.
So far in 2016, gold prices are up about 25%. Know that there could be more upside. Surely, we might see a minor pull-back in gold prices because of profit-taking, but it could be a buying opportunity. Looking to 2017 and beyond, gold could continue to trend higher and break well above the highs made in 2011.
Obviously, only time will tell.