The Midas Method: Why Gold Shines Now

London (Mar 3)  Maybe there’s an investment message behind President Trump’s installation of gold curtains in the Oval Office. In the turbulent Trump Era, we’ve witnessed the emergence of “gold mania” among increasingly anxious investors.

In recent days, the coronavirus outbreak has pummeled economic activity, global growth and stock markets. As of this writing on Tuesday, at least 89,000 global cases have been reported and the overall death toll stands at over 3,000.

The stock market dropped more than 10% last week, a correction triggered by the epidemic. On Friday, the CBOE Volatility Index (aka “fear gauge”) rose to heights not seen since the Great Recession.

But on Monday, expectations that the Federal Reserve would boost rates in March sent stocks soaring. The Dow Jones Industrial Average yesterday rose 1,294 points, its biggest daily jump since 2009, as bargain hunters came to the fore.

In pre-market futures trading this morning, stocks were seesawing between red and green as nervous investors awaited a statement today from the Group of Seven industrial powers concerning the coronavirus crisis.

Welcome to the roller-coaster. It’s under nerve-wracking conditions like these that the Midas metal shows its mettle.

For several months, I’ve been advising readers to maintain an allocation in their portfolios of 5%-10% in gold, in the form of either gold mining stocks, exchange-traded funds (ETFs), or the physical bullion itself. If you have been following this advice, you’re sitting on some nice gains.

Conditions are ripe for gold price appreciation. But don’t just take my word for it. Nouriel Roubini, the famous economist who earned the nickname “Dr. Doom” for his accurate predictions of the 2008 financial crisis, believes that the spread of coronavirus will torpedo the global economy and stock market.

Roubini last week told the German magazine Der Spiegel that the coronavirus will “shock the world” and cause the stock market to drop by as much as 40% this year. If it comes to pass, Roubin’s scenario would propel gold prices skyward.

China, where the coronavirus epidemic originated, already is experiencing a pronounced economic slowdown. China’s manufacturing purchasing managers index plunged to 35.7 in February, the lowest level since the survey began in 2004, the Chinese government reported on Saturday. Analysts cited the coronavirus as the culprit.


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