The Future of Gold
The future is looking bright for gold prices as 2017 unfolds. After starting the year at $1150 per ounce, gold quietly rallied over 9% during the first 3 months of the year, outpacing every major US Stock market index. We feel the best is yet to come.
When trying to forecast gold prices for 2017, there is one thing that really matters: the value of the U.S. Dollar. If the dollar is strong, gold normally falls in value. If the dollar weakens, then gold will rise. It really is as simple as that. We feel gold is setting up for the next leg of an historic bull-run.
Timing is Everything
After the election, the dollar soared to a 14-year high and the stock market surged thanks to the so-called “Trump Rally.” This is the reason why gold pulled back at the end of the year and exactly why gold appears to be so attractive under $1,250 an ounce.
Last year, as you can clearly see in the chart below, gold rose in value 19% in the first quarter alone from early January to the March top. As we see it, the gold pullback after the election makes an ideal window of opportunity to generate significant profits in the coming months.
The lesson to learn here is that bargain basement prices for gold and silver have arrived. The 14-year high in the U.S. Dollar makes gold even cheaper at this moment in time, which is good if you’re a contrarian investor not swayed by media misinformation.
Trump Should Be Great for Gold
For President Trump to get American trade going, long-term, he must get the value of the dollar down from its lofty perch. A consensus is growing that the new President will become the “Inflation President,” and we can’t think of anything better for gold than old-fashioned, Carter-style inflation.
“Trump is about to make inflation great again.”
Trump: The Inflation President?
Money created out of thin air historically creates inflation. In fact, it’s the very definition of inflation. Last year alone, the federal deficit rose by $1.4 Trillion. The inflation and the growing money supply created has without a doubt flowed into the U.S. Stock Market and driven the dollar through the roof.
Then, Trump enters the scene unexpectedly. His campaign promises are to increase the near $20 Trillion debt today by another $10 Trillion projected over the next ten years.
The massive increase in fiscal spending to rebuild roads, bridges, airports and the military is unquestionably inflationary. He will use his philosophy of using cheap borrowed money, to build, create jobs, and attempt to inflate away many of America’s overwhelming debt issues.
The Promise of Tax Cuts
The waves of promised tax cuts for big business and the middle class will also add swirling dollars to the economy. Like Reagan, Trump believes cutting taxes will produce levels of growth that will eventually pay off in better tax revenue to the Feds. Tax cuts are also great for retail, home, and automobile sales– but decidedly inflationary over the long-term.
Even though it isn’t accurately reported by the mainstream media, there is already massive inflation being created by the Federal Reserve’s near-zero interest rate policies—anyone with a family to provide for or a kid in college can attest to that statement.
The U.S. Dollar Must be Devalued
Our economy is dependent upon international trade and a competitive U.S. Dollar. For President Trump to be successful in putting Americans back to work in 2017, he must also suppress the value of the U.S. Dollar so we can sell goods competitively overseas. China has rigged the game by devaluing their currency time and again. Currently, the U.S. Dollar sits at 14 year highs– that’s bad news for international trade.
For a variety of reasons, the dollar cannot trade at ever-higher prices; it must go down in value. When the dollar declines, the gold price rises automatically. It’s a sure thing.
The good news is that today it’s a little cheaper for us Americans to buy physical gold at today’s lower prices, however, we feel this opportunity could change quickly as the year goes on.
Putting Gold Into Perspective
You shouldn’t think of buying gold as a “trade” or a “get rich quick” scheme, rather, we view gold as an inter-generational wealth investment. Wealth preservation and privacy is the primary strategy of owning hard assets, and history has proven its true worth and purpose during inflationary times.
We believe that gold, silver, and other precious metals, also serve as an alternative form of preserving and growing wealth. We don’t consider them as speculative investments, despite the volatility of the 21st century. Gold has always served to preserve long-term buying power.
This is not true about the U.S. Dollar. A dollar depends on confidence to sustain its value and we are currently in uncharted territory when it comes to the unsustainable government debt.
The fragility of the fiat U.S. Dollar worries all of us. To “Make American Great Again,” Trump knows the value of the dollar must go down to make U.S. goods competitive overseas. This is why we love gold at current levels.
To the surprise of many, gold has been the best performing asset class since 2000, which coincides perfectly with the start of radical monetary policy this century.