Where is the gold price headed?
As the fears around North Korea subside, so too does the soaring price of gold. The spot price for the yellow metal has slipped back 0.1% to $1,332.50 a troy ounce. September, however, has been a good month, seeing it rise 2.5% overall.
5 factors why Gold has surged in 2017
- the continued drive for a cashless society
- continued currency debasement
- hugely indebted U.S. and global economy
- fragile world banking system
- ultra low interest rates
Other factors influencing the price have been Hurricane Irma one of the most powerful storms on record. Also on golds current value, we have what you might call a ‘war premium’ between $30 to $40, which will either evaporate or increase depending on how events in North Korea pan out.
Another seasonal boost for the metal is the onset of the Indian Wedding season, which is from October to December, when some 10 million couples get married! Approximately one third of all physical gold demand comes from India, half of which is spent on gold for the big occasion.
So will the demand continue?
Some pundits are saying they expect a continued restrained demand for gold. This, in part, is due to the geopolitical uncertainty at present. These experts expect it will stay just above $1,300 a troy ounce. Bank of America Merrill Lynch are saying that the US dollar may remain supportive of gold and that it may hit $1,400 over the next few months. We shall see.
Go long (A long position is a bet an asset/holding/investment will increase in value over time)
Go long on physical gold and silver, because unlike fiat currencies which depend on faith, gold does not. It is not a commodity. Central banks know this, and that is why they hoard it by the tonne — but they don’t want you to think that way. You only have to look at the historic climb of the gold price to see that going long makes sense. For example on the 1st January, 1972 gold was £18.26 a troy ounce. Also on the side of precious metals is that fiat currencies are doomed. It is just a question of when gold and silver will come good, so holding either or both makes sense.
Gold allocation for your future wealth
It has never been more crucial to have an allocation to physical gold and silver, especially with the global economy in such a volatile state. Even Mr. Mario Draghi (President of the European Central Bank) conceded in 2013 that gold holds a “reserve of safety”.
However it is worth crucial out that Gold is not a magic investment that will make you wealthy. But as part of achieving a diversification strategy within a folio it is a great component. As with any holding you need to be able to sleep at night, so you have to be comfortable with your exposure. There is no set percentage for a folio, it varies wildly from 5% upward.
Finally, it is always worth reminding ourselves that Gold is CGT (Capital gains tax) free, and a great way to pass on wealth to our children. I shall leave you with an old Dutch proverb:
An ounce of patience is worth a pound of brains.
If this has been of any interest or help please share. And as usual your comments are always welcome!