The gold market fuse has been lit, boasting new highs for 2019 at $1,532 an ounce. For those of you who are not paying attention, this is a 26.93% increase in the last year! On Aug. 6, 2018, the spot price was $1,207, and today it reached as high as $1,532 before pulling back from the daily highs.
Holmes and Watson can be called off the case because it is no mystery or secret what is causing the precious metal market to heat up:
· Federal Reserve Chairman Jerome Powell announced that the central bank lowered interest rates for the first time since the Great Recession in 2008 by 25 basis points to help fight off the possibility of an economic downturn.
· President Trump announced new tariffs he plans to place on Chinese goods in the ongoing trade war. China promptly responded by devaluing its own currency to the weakest level since 2008 (hearing a theme yet? hint: 2008) and ordering its state-owned companies to cease and desist any and all purchases of U.S. agricultural products. By doing this, China is absorbing any possible economic blow from U.S. tariffs by making their products cheaper to increase international trade from other countries. This trade-and-now-currency war has resulted in an abrupt stock market sell-off with no end in sight. To give you an idea, the Dow fell 760 points last Monday and still hasn’t fully recovered. In times like this, volatility is to be expected, and we have no idea how fast or how long these stocks will continue to sell off.
· Central Banks are continuing to buy gold and silver. Russia, China and Poland, just to name a few, are adding to their positions monthly. Though my purchasing power is meager compared to that of national central banks, I am following their lead and adding to my position monthly as well. If China and Russia are stockpiling to protect their nation from financial or economic collapse, I can certainly stockpile enough to protect myself from the same impending fate.
The message is simple and the reasons to own physical gold and silver are numerous and obvious. Nations are expecting gold to protect against uncertainty, conflict and equity market collapse. Why should we not expect the same performance? We are headed into uncertain times with falling interest rates, trade wars, currency wars and massive gold binging by major nations. Now is the time to make sure you are protected as well. Physical gold and silver perform well in times of uncertainty. How long will you wait to protect your clients’ wealth or your own?