This article was written by Daniel Sesay, Chief Market Strategist at The CityTA.
Second class investment?
It is hard to believe that in 2003 gold was roughly $250/oz and by 2011 gold was trading st $1900/oz. This was roughly a 700% gain. If I am not mistaken, gold outperformed stocks, housing and commodity investments.
One thing I am sure of is that one of these players will dominate 2016
It is naturally a wonder that gold still is somehow looked at as a second class investment relative to equities. I am not talking about paper gold here but the good old physical gold that somehow fell completely off the radar. The awareness of the true value of gold is accompanied by the arrival of Veritaseum, founded by Reggie Middleton, that is threatening to take out the middlemen in the financial spectrum- imagine an end to brokers and banks.
A P2P trading world built on blockchain technology facilitated through Bitcoin. Today Bitcoin is trading at $370, I can only imagine that the $700 level remains a possibility in the near future. I raise this point in connection with gold because I am of the opinion that the futures market and other derivatives serve only as means for certain interest to keep the underlying asset under priced or over priced as it suits.
Let’s face it…is gold really worth $1,100/oz in the face of the massive QE programs that are now commonplace?
We are now heading into the US election with candidates like Donald Trump promising an overhaul of the financial system and stopping short of declaring all out war on banking. The Federal Reserve is the owner of the US dollar- in fact its true name is the federal reserve note.
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There are a great many individuals who would like to see an end to the Fed’s monopoly on global finance. Donald Trump is certainly one of those individuals. That being said, he is not in the driving seat yet, in fact far from it. We all know polls can be deceiving. In my opinion a Trump vote could be bearish for the dollar short term but without any fundamental change, I expect the dollar to maintain long term value.
Gold is likely to stay incredibly volatile as we move further into 2016, it appears that demand is returning and I am expecting at least $1200/oz, possibly even $1400/oz this quarter.
gold outperformed stocks, housing and commodity investments
As pointed out earlier, in a stronger dollar environment we can expect gold futures to continue to keep gold locked in a volatile range between $1000 and $1400 per ounce in the near term. It is getting harder to call gold under $1070/oz so any sell ideas have to start under the key level. It is natural to believe gold is starting a comeback.
It is an exciting year ahead for the US dollar and gold. One thing I am sure of is that one of these players will dominate 2016. Let’s not forget there is a new player on the field, an obvious blind spot and somehow I have a feeling that the US election will have a role to play in how this story ends.