It is one of the oldest investment adages out there: sell high and buy low.
With the S&P 500 hitting serious redline territory and new records almost daily, it is time to consider your diversification strategy.
Some investors are surprised to learn that gold and silver, while performing well in 2016, are both still far below their historical high points. Gold is still 30% below its 2011 high of $1900 per ounce, while silver is almost 60% below its all-time high of $48 per ounce.
Swiss Asia Capital’s Singapore managing director and chief investment officer Juerg Kiener says gold prices could hit all-time highs in the next 18 months.
In his view, global political unrest such as the controversial “Brexit” vote, where U.K. citizens voted to leave the European Union, means gold prices are headed up. The lack of trust in political and economic institutions has never been greater.
Kiener believes the ongoing cratering of bond yields has blunted any advantage of bonds over gold. Negative yields in government-controlled bond markets make investors anxious and likely to seek alternatives. According to a Fitch Ratings report, the level of negative-yielding global debt has risen to almost $12 trillion since the end of May following Brexit.
Wall Street Raising Expectations
Wall Street banks have been raising their gold price targets. A recent BofA Merrill Lynch global research report states that gold prices could rise to $1,500/oz. near-term.
Global jitters isn’t the only reason. Gold prices have also gained ground because production is falling and demand is rising. For example, bullion sales at top Japanese gold retailer Kikinzoku Kogyo K.K. jumped 1.8 fold in just one week. Central banks have continued adding to their gold reserves.
There are multiple factors providing support for higher gold prices in the years ahead:
Anemic global growth and stagnant incomes
Backlash against globalization
Income inequality
Massive government debt
Lack of supply and rising demand
Silver Market Update
Citigroup analyst Tom Fitzpatrick is bullish on silver and thinks the gold/silver ratio will continue to trend in favor of silver. He sees the bull market in precious metals as well underway.
As of July 4, 2016, silver prices have rallied 47% so far this year. Silver just recently broke through $21/oz. for the first time since August 2014.
However, this is still far from silver’s historical high in 2011: in April of that year it hit $48.48 per ounce.
Unconventional Monetary Policy is Destroying Paper-Based Assets
Pressure is mounting on the Federal Reserve not to raise interest rates amidst a precarious global economy. Further tightening appears unlikely for the remainder of the year. In fact, some analysts are predicting the Fed could even lower rates.
The Fed will not be able to exit from its unconventional monetary policy without some fallout. The Fed’s policy of balance-sheet expansion clearly undermines the stability and integrity of the paper-based asset system.
Billionaire investor and major gold buyer George Soros thinks we are facing an extremely difficult period, with a decade or more of economic stagnation. The best-case scenario is more economic deflation. The worst-case scenario is a complete collapse of the financial system. According to Soros, the Brexit/EU breakup will hammer the U.S. financial system.
Time to Think Out of the Box
Are you willing to risk your retirement on a gamble… that our leaders will be able to manage the global economy better tomorrow, when all prior evidence indicates that they never have?
Being prepared for the worst, while hoping for the best, is a wise strategy to follow in times like these. Market volatility is not going away.
Today, more than ever before, it is time to consider physical gold and silver for your retirement portfolio. How else to withstand the strains of severe market turbulence that shows no signs of ending?
