Gold Prices to Soar on Back of Global Uncertainty
Gold prices are setting up to reward investors big-time, and there could be killer profits made in the midst of it. Investors falling for the noise against the precious metal could be making a big mistake.
It’s almost comical how the notion continues that gold isn’t worth holding when interest rates are going higher.
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Newsflash: the U.S. Federal Reserve is the only major central bank talking rate hike. Across the globe, the situation is completely opposite: rates are low and not expected to increase anytime soon.
This has been said over and over again in these pages; when looking at gold prices, think global. Don’t just think of the precious metals in U.S. dollar terms. In fact, one could call gold a true global currency.
With this, understand that the fundamentals of the gold market are now stronger than they were even when gold prices were hitting their highs in 2011.
This is going to sound bold, but we have a perfect storm in the making for gold prices: the demand for the metal could surge, and the supply side remains anemic.
Investors must ask: what happens if the euro hits parity against the U.S. dollar? Will investors in the eurozone just let it happen or will they seek safety? Chances are, they could be rushing to the precious metal if they haven’t already, and this could send gold prices through the roof.
How about in India? The Indian government, not too long ago, banned the use of its most circulated notes, saying it wanted to end corruption in the country. Those who had cash on hand, all of sudden found themselves with something that became worthless in an instant.
Gold has value.
Won’t investors and consumers in India be looking to store their wealth in something that holds value regardless? It’s possible, and they could be rushing toward gold.
But, don’t just stop here.
In the U.S., the new federal administration is challenging a lot of things. This could cause even more uncertainty around the globe.
For instance, during his campaign for the top office, President Donald Trump talked about how he could make major changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Understand that repealing this could give an instant boost to the financial sector, but it could also create the same sort of problems that led to the financial crisis of 2008–2009.
Saying the very least, this is going to be great for gold prices.
Where Will the Big Money Be Made with Gold Prices?
Keeping all this in mind, know that as gold gains traction and prices increase, gold mining companies are going to report massive gains.
Consider this: year-to-date, gold prices are up about five percent. If you look at major gold mining companies like Goldcorp Inc. (USA) (NYSE:GG), they are up over 16%. Dear readers, that’s over three times the leverage over gold prices.
Now, assuming that gold prices go up just 30% from where they currently trade, mining companies like Goldcorp could provide investors with returns of close to 100%.
Mind you, junior mining companies require a lot of risk tolerance; they could show even lucrative returns. Consider Entree Gold Inc. (NYSEMKT:EGI). It’s up close to 78%, almost 16 times the price of gold.
Please note: these are not recommendations to buy, but rather examples of opportunities that investors could seek.
