Gold still dancing around $1,200. The price of Gold is down more than 8 per cent this year to $1,205 a troy ounce, and down from a peak of $1,366 in January. The price of Gold has suffered from the continued strength of the U.S. dollar, which makes gold more expensive for foreign buyers. U.S. interest rates continue to rise and have risen steadily since January and with the Ten-Year Treasury now at 3.05 percent, a four-month high, many experts expect this trend to continue.
Holding gold is less attractive than other investments since metal provides the no fixed income return. At the same time, retail investor have alternatives to investing in gold, with the rise of cryptocurrencies such as Bitcoin and others.
(Don’t get depressed…keep reading!)
Few mining companies have been spared in the sell-off of the price of Gold, with some of the largest names in the industry notching up losses of up to 40 per cent. Barrick Gold, the world’s largest producer, is down 27 per cent, while Newmont Mining is off 20 per cent and Randgold Resources, London’s biggest gold miner, has dropped 39 percent. The Philadelphia Stock Exchange Gold and Silver index has lost 25 per cent year to date. Yet for most of the year, share prices tracked gold until late July when Vanguard announced it was restructuring its $2.3bn Precious Metals and Mining Fund. “It damped sentiment, that’s for sure,” said one fund manager, pointing to shares in Newmont Mining which were flat for the year before the news broke. “And it happened just as gold dipped below $1,200 an ounce.” In a statement, Vanguard said it was restructuring the fund to “improve investor outcomes” and that “the Precious Metals and Mining Industry group presents a limited investment pool.”
My intention wasn’t to depress you with the information you just read, but to give you confidence that our time
as a Gold investor is right around the corner.
With the outcome of the midterm elections in doubt, no one knows for sure what effect it will have on the Equity Markets and interest rates going forward. Especially if either house majority turns Democratic, you can be sure the President’s agenda will be turned upside down.
All you have to do is speak to many financial advisors as I do. Many tell me they aren’t seeing any fresh money coming into the equity markets at this time. Some have seen an increasing amount of stop loss orders being placed by their clients in the event the equity markets turn south. So one must believe that the Equity Markets have run out of gas and it’s now time to consider a dollar cost averaging approach to entering the physical gold market.
Yes. the average large mining stock is down 40 percent this year, but the price of Gold is only down single digits, even with all the negative news. So maybe it’s time for a rotation out of equities and into commodities.
So far, the price of Gold hasn’t yet reacted to the current trade war, or the exploding budget deficit, because the tax cuts and corporate earning still hold center stage. But with inflation on the rise and government spending out of control (just look at the country’s debt) one would expect the price of Precious Metals to take off and be the darling of the individual investor once again.
The results from the midterm elections could have “dramatic consequences” for our economy and the individual
investor in the years ahead.
Have a wonderful Wednesday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.