$1400 Gold Is Next Level - Bloomberg Intelligence

Release Date: 
Friday, April 28, 2017

Gold prices ticked up on Thursday and Friday on disappointing economic news but the gains were unable to overcome earlier losses.

"Gold rose on Friday as forecast-beating euro zone inflation data boosted the euro versus the dollar, while global stock markets retreated from Wednesday's record highs on concerns about global trade… 'At this point, $1,300 looks like it's more appealing for gold than $1,100,' ING analyst Hamza Khan said. 'A bit more weakness in the dollar, combined with more movements around North Korea, could be the situation that sets the stage for higher gold prices…." ("Gold firms as dollar, stocks retreat, but still eyes weekly loss," Reuters, 4/28/17.)

Gold ended the week down $16.20, closing at $1,268.70. Silver prices closed at $17.26, down $0.74.

$1400 Gold Is Next Level - Bloomberg Intelligence
Bloomberg Intelligence's Mike McGlone believes that gold prices are now targeting $1400 per ounce.

"You have to look at gold in the bigger picture… it's just doing what it's supposed to be doing in this environment. The dollar looks like it's done with its rally. Remember we had this massive 'buy the rumor' rally. Since the Fed has started tightening the dollar has gone down and gold has been the best performer. In fact, it has actually outperforming the stock market. So look at it this way. In a tightening cycle, gold is supposed to outperform and historically it has - it's doing that. What happens if this cycle stops which is the risk right now and gold potentially has indicated that by doing well versus other commodities, bond yields going down  and so that's what I see it's going up to the next level… [Gold's] main adversaries, a strong dollar, is basically gone and if that's going to continue gold won't have a problem. And the stock market continues to blast off that's great but volatility in the stock market… has no place but to go up…." ("Is $1,400 Gold The New $1,300? - Bloomberg Intelligence's McGlone," Kitco News, 4/21/17.)

Five Reasons To Own Gold - Forbes
Forbes commentator Stephen McBride identified five reasons why investors need to own gold.

"There are… some good reasons gold should be an essential part of every investor's portfolio.

#1: Real Interest Rates Are Still Negative. Even with the Fed raising nominal interest rates, real rates—that is, the nominal interest rate minus inflation—are still in negative territory. And real rates are what really matters to your portfolio… So, gold will protect your capital from the eroding forces of negative rates… and help it grow at the same time.

"#2: The Dollar's Value Has Collapsed. The U.S. dollar may be rising against other currencies like the euro and yen. Nonetheless, in the last 50 years, its purchasing power has fallen by 86%… gold has more than kept up with inflation. Since 1972—the first year private ownership of gold became legal again—the price of gold has increased by 2,400%.

"#3: Gold Is Money.  Why has gold retained its value while fiat currencies have fallen? It's because gold is money. 2,000 years ago, Greek philosopher Aristotle theorized that any sound form of money must be: durable, portable, divisible, and have intrinsic value.
Gold has all these characteristics— that's why it has proven to be a long-term store of value …

"#4: Negative Correlation to Stocks and Bonds… [A] portfolio comprised of 60% stocks/40% bonds no longer offers investors adequate diversification. Sure, it's great when markets are rising—but when the tide turns, that's going to be a problem. To keep all your eggs "out of one basket"—buy gold…

"#5: No Counterparty Risk.  Gold is one of the few assets that has no counterparty risk. What does that mean? No counterparty risk means that once you have physical gold in your possession, you don't depend on someone else to fulfill a contract or keep a promise for it to retain its value…

"Given the negative real rates, a falling dollar, and heightened correlation between stock and bonds, gold should be an essential part of every investor's portfolio today." ("Warren Buffett Hates Gold... But Here's Five Reasons You Need To Own It," Forbes, 4/27/17.)

U.S. Economic Growth Slowest In Three Years
Fox Business reported the U.S. economy faltered dramatically in the first quarter of 2017, growing at its slowest rate in three years.

"The U.S. economy stumbled in the first months of the Trump administration, growing at the slowest pace in three years in a sobering reminder of the nation's economic sluggishness. Gross domestic product grew at a 0.7% annual rate in the first quarter from the preceding three months, the Commerce Department said Friday. Economic output has grown an average of roughly 2% during the nearly eight-year expansion.

"Friday's data offered the broadest report card on the economy in the nearly 100 days since President Donald Trump took office pledging a return to faster growth, and the outlook was mixed. Economic output failed to match the surging confidence expressed by consumers and businesses since the November election … The main factor behind the latest slowdown: sluggish consumer spending. Household outlays grew by the smallest amount since late 2009, as Americans reduced purchases of big-ticket items like cars and spent less on home heating during the warm winter. Rising inflation also cut into paychecks…." ("U.S. GDP Growth Slowed on Tepid Consumer Spending," Fox Business, 4/18/17.)

North Korea Threatens U.S. With Nuclear War In Shocking Video
As President Trump and Secretary of State Tillerson warn Americans of the nuclear threat posed by North Korea, the rogue nation released a video simulating a nuclear attack against Washington, D.C.

"A North Korean propaganda outlet released a video clip on Thursday showing simulated attacks on the United States and declaring that 'the enemy to be destroyed is in our sights.' The video comes at a particularly tense time in relations between North Korea and the United States, with the Trump administration sending warships to the region in a show of force against Kim Jong Un's regime...

"President Trump, who has been urging China to apply pressure on North Korea and has warned that his administration will act if Beijing doesn't, convened members of Congress on Wednesday to brief them on the 'very grave threat' posed by Pyongyang. At the same time, one of the U.S. Navy's largest submarines, the USS Michigan, which carries Tomahawk cruise missiles, docked in the South Korean port of Busan this week … U.S. officials this week said the Pentagon is developing military options after having directed the Carl Vinson strike group toward the Korean Peninsula…." ("North Korea puts out new video showing the White House in crosshairs and carriers exploding," Washington Post, 4/27/17.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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