The gold market has ignited, with the price now at fresh highs for the year.
As we write on Friday August 2, gold is trading at $1,446 per ounce. That represents a 13% year-to-date gain.
The reasons for the spark aren’t difficult to identify.
- Trump unexpectedly announced a fresh round of tariffs on China yesterday. Gold immediately responded, while stocks abruptly sold off. The trade and currency wars between the US and China seem to have no definitive end in sight.
- The Federal Reserve announced an interest rate cut of 25 basis points on Wednesday. While widely expected, lower rates make gold more attractive to Wall Street since the holding cost falls relative to bonds.
- Negative rate debt swelled this week to $14.1 trillion, the highest ever. On Tuesday, the market value of the Bloomberg Barclays Global Negative Yielding Debt Index saw its biggest one-day jump in a month.
- As we said would happen in our Q2 update, a number of central banks have continued to binge on gold. China has added gold to their Reserves seven consecutive months now, Russia buys virtually every month, and Poland bought a whopping 100 tons in the second quarter, the most by any central bank since 2009. In total, nations added 374.1 tons in the first half of 2019. The trend is expected to continue; a recent survey of central banks showed 54% expect global holdings to climb in the next 12 months.
- While we don’t recommend bullion ETFs, holdings in many of these funds have soared to new highs. As one example, holdings in BlackRock’s iShares Gold Trust are now at the highest level ever, with assets reaching $111 billion at the end of June.
Gold’s gain in June was its biggest one-month advance since February 2016.
There are clear messages here: the reasons to own gold at this point in history are numerous, and growing. The second message is that gold is doing what it’s supposed to: protect against uncertainty, conflict, and market turmoil.
Are you sure you have enough ounces for the road ahead? Because the reasons outlined above could be the beginning of an extended period of volatility and risk. The return to healthy markets, honest economies, a stable currency, and healthy geopolitics will indeed be measured in years, not days or weeks. The gold you own through this tumultuous period will offer you and your loved ones a financial shield you simply can’t find anywhere else.
If you don’t own enough physical gold, we encourage you to add to your account. Mike and I and everyone else here at GoldSilver are as convinced as ever it will likely pay off bigtime.