Gold Prices Remain Undervalued, Major Gains Could Be Ahead
Gold prices have increased close to 11% since the beginning of 2017. If you think that’s all with the precious metal, you could be making a grave mistake. Not only 2017, but 2018 could be a stellar year for gold prices as well.
What makes me come to this prediction?
Advertisement
As it stands, I see gold to be one of the most undervalued assets. It could be a classic “buy low, sell high” trade in the making.
Before going into any details, its important to understand what “undervalued” really means.
Also Read:
Precious Metal Analysis: Keep Gold and Silver on Your Radar in 2017
You see, an asset is considered undervalued when its fundamentals are improving, but prices haven’t caught up. This could be because investors are overlooking.
Talk to any gold expert and they will tell you that gold prices and the U.S. dollar have an inverse relationship. As the U.S. dollar declines, gold prices soar. In case you didn’t know, the U.S. dollar is hands down one of the worst-performing major currencies. Year-to-date, the Greenback is down close to 9.5%, and it looks like it could fall even further.
A few years back, as the U.S. dollar declined, we saw gold prices skyrocket. What we are seeing now is really odd, to say the least. Gold prices aren’t as reactive. The yellow metal is ignored.
Stocks And Bitcoin Reason Behind Gold Prices Remaining Suppressed?
Digging deeper, why does gold remain suppressed?
One of the biggest things I could think of is asset allocation.
Have you seen key stock indices lately?
Currently, stock markets are making new highs. So investors could simply be rushing to buy stocks over gold. This is a very common occurrence. Investors tend to run toward markets that are rising. Why keep an asset in a portfolio that’s flat, compared to an asset that’s rising in value?
Also, there’s also the emergence of cryptocurrencies—Bitcoin and others. In recent months, these currencies have had a solid move to the upside. Again, this could be a factor that’s keeping gold prices suppressed. Investors could be buying these currencies in order to diversify.
Mind you, when it comes to cryptocurrencies, I believe they are in a price discovery phase. It will take years for them to become mainstream. But, I don’t think they can ever replace gold. Obviously, with time, we will know more.
Gold Prices Outlook 2017, 2018, And Beyond
Go back a little.
2016 was a positive year for gold. 2017 could be the same. If this is the case, we will have two years in a row when gold prices increase.
Going into 2018, it wouldn’t be shocking to see gold pop up on investors’ radars. They could be looking at the precious metal and asking if it could run up. As a result, we could see more buyers come into the gold market, and the yellow metal could show even better performance than so far in 2017 or in 2016.
Dear reader, every day, I look at gold prices and am amazed at how investors are ignoring the yellow metal. I am more bullish on gold than anytime before. I continue to see gold above $2,000 in a matter of years.
I will end with this; to me, it wouldn’t be shocking if one day I wake up, and I see gold prices soaring $75.00 to $100.00 an ounce in early trading. That would be an indicator for me that investors have realized that gold is undervalued, and is worth buying.
