The performance of stock markets has been horrendous by just about all measures. Furthermore, events of the past few days have brought the realization that the economy may very well be headed towards recession if it is not in recession already.
Stock market indices performed last Friday and started this week on another slide. The outlook for the future does not look particularly promising either, as the Federal Reserve will begin its much anticipated quantitative tightening at the beginning of June.
With such poor performance and so much fear of the future, you would expect gold to shoot up in price as investors flock to gold’s safety and security during times of crisis. Nevertheless, while retail gold demand has remained strong, the gold price has fallen right along with stock markets. How does that make any sense?
You are not alone if you scratch your head wondering why gold is following financial assets southward. Likewise, both gold owners and casual observers wonder why gold has not taken off right now. Nevertheless, there are excellent reasons for what gold is doing and why the long-term outlook for gold remains bullish.
Gold May Not Go Up Tomorrow, But Give it Time and History Shows it Always Will
The first thing to remember is that gold has its ups and downs, just like every other asset. Gold may be less volatile than stock markets and not subject to the same booms and busts as stocks, but it still fluctuates in price over the days, weeks, months, and years.
Gold even can go down in price when you otherwise would expect it to rise in price. Just look at the period from October 2007 to March 2009.During that period, stock markets peaked in October 2007 and reached their lowest point in 2009, falling over 50%. Gold gained 25% over that same period. Nevertheless, within 2008, gold had also declined 30% from its highs, from $1,000 in March 2008 to under $700 by October 2008.
Nevertheless, gold recovered after that and continued making gains while stock markets faltered, and it never looked back. So it is important to remember that just because the gold price may be going down when we expect it to go up does not mean that something is wrong with gold.
Gold is a long-term investment for most people and not a get-rich-quick scheme. However, unfortunately, the gold price has been hurt by hedge funds selling their gold holdings to exit their investment positions. Perhaps they feel there is a short-term case for shorting gold, or they have to drum up cash to cover other situations. Whatever the reason, that appears to be one of the primary factors causing gold to lose momentum recently.
However, it is okay for that to happen. It does not mean that gold will not end the year at $2,100 or that demand for gold will plummet. Ordinary people have been buying gold for months. They will not stop, especially now that the economy could be entering recession and stock markets are showing signs of weakness. If anything, this price retrenchment could be a good buying opportunity to buy the dip.
Gold as Part of a Long-Term Investment
The critical thing to remember is that gold rises in value over the long term. If you own gold or want to buy gold, you are probably not looking to sell it again within the following year. Gold for you, like many people, plays a part in diversifying your investment portfolio and protecting the long-term value of your assets.
If your time horizon for investing in gold is two years, five years, ten years, or even longer, these short-term fluctuations in the gold price are not anything to worry about. Instead, what matters is the long-term growth of the gold price, which, as it stands right now, could be very good given the headwinds facing the economy today.
We have an economy teetering on the edge of recession, having contracted 1.4% in the first quarter of this year. We have the highest inflation in 40 years, with prices seeming to rise just about every week. We have a job market where more people than ever quit their jobs. As a result, employers have a more challenging and stricter time filling positions. Furthermore, we have supply chains that are still wholly discombobulated.
Even worse than what is happening today are the prospects for the future. The Biden administration wants to keep raising taxes and spending money. The Federal Reserve does not acknowledge its role in creating inflation and wants to tighten its monetary policy slightly but probably will not be able to do nearly enough to fix things.
The US economy in the 2020s is looking increasingly like the economy of the 1970s. If this decade is a repeat of what happened 50 years ago, we are all in for a rough ride. Back then, inflation peaked at around 11%. Stock markets saw a total of about 4% growth over the decade. Rising prices and periodic shortages were the names of the game.
However, gold was a bright spot, making average annualized gains of over 30% over the decade, surpassing both inflation and stock markets. Suppose gold repeats that same kind of performance this decade. In that case, those who trusted the yellow metal to protect their assets will likely be able to give themselves a big pat on the back.
Buying Gold and Silver Today
If you do not own gold already, now is to begin picking up both Gold and Silver bullion quickly. Gold and Silver will diversify your portfolio and reduce the enormous risk we face. Any investment valued in the dollar is under tremendous pressure and is collapsing, or will be soon. So make sure to protect your assets against loss during financial downturns. Moreover, best of all, you can buy gold using the profits you’ve made over the last decade is we’ve created the most giant debt bubble in the history of the world. Don’t expect to get rich overnight, but you will be able to sleep better throughout the night knowing what you’ve worked so hard for is safe. Call us here at GoldPro at 855-423-4653 , or Shop with us online at GoldPro.com
