Lately in the gold and silver industry a theme has begun to emerge with everyone waiting for a break-out month or year. This theme is global, affected by political influences coming from around the world as well as global economics.
Today, the U.S. dollar-to-gold ratio is roughly 1,280 to 1. By U.S. standards this seems to be fairly cheap and – many would say, and I would agree – a great buying opportunity. However, this same opportunity doesn’t exist in 72 other currencies where gold is at or near all-time highs. Included in the list of currencies are the Canadian dollar, Mexican Peso and the Australian Dollar, not in the list of 72 are the Euro, Chinese Yuan and the Swiss Franc, but they are not far off. Though they are not within a few percent of their all-time highs, they are still a far cry from lagging like the U.S. gold market.
Why is this? It’s simple: the U.S. dollar is doing very well on a global scale, so much so that it may be hiding the next gold bull market. As many know, physical gold and silver is a great hedge against the dollar, so it is no surprise to us that when the dollar is valued high, gold is valued low. Therefore, in the U.S. gold and silver market, the buying opportunity still exists.
In my opinion, the strength of the U.S. dollar is unsustainable. The Federal Reserve can only keep up the game of printing fiat currency for so long before the impact throws a shock through the system and investors turn to commodities as a safe-haven asset. Moreover, the deficit spending that the government is doing is going to drive up inflation and, in turn, the price of commodities.
One of the best ways to hedge dollar performance, inflation and dollar-based financial portfolios continues to be physical gold and silver. If funds do not allow non-qualified purchases, we do have the ability to keep your clients’ physical metal in qualified accounts via physical gold and silver IRAs that are stored for them. Be sure to let your clients know that you have the ability to help them hedge their portfolio in times of uncertainty.