It has been a very good year for gold so far, with gold prices up about nine percent year-to-date. But I believe that the biggest gains for gold are still ahead, with a target price of $2,500 an ounce by the end of this decade. It’s more than possible.
Factors Behind Gold Prices Going up
At the core of the issue, gold prices tend to move higher because of three main factors: uncertainty (political or economic); inflation; and currency devaluation. And, as it stands, all three of these factors are currently in gold’s favor. Gold could be one of most undervalued and ignored assets right now.
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7 Areas of Concern Affecting Gold
Here are just seven current areas of concern:
- The Middle East is becoming more divided with each passing day;
- The future of U.S.–China relations and the future of North Korea’s nuclear program are unclear;
- Brexit’s impact on the European economy is uncertain;
- In terms of monetary policy disparity, the U.S. Federal Reserve is raising interest rates while other major central banks continue to keep rates low and print more paper money;
- The U.S. Congress has been unable to get any meaningful legislation passed;
- If it were not for the Federal Reserve raising interest rates, the U.S. dollar would be in a free fall; and
- All those trillions of dollars that the Fed printed to “save the economy” after the credit crisis of 2008 will come back to haunt us in the form of rapid inflation.
Yes, the performance of gold prices this year has beaten the performance of the Dow Jones Industrial Average (DJIA). We need to keep in mind, however, that the increases in interest rates by the Federal Reserve (three rate hikes so far since December 2016) have actually been good for gold prices. And I can’t see why the Fed’s proposed two additional rate increases for the rest of 2017 wouldn’t also be good for gold.
A Great Year for Gold & Gold Stocks
No investment ever goes up in a straight line. Yes, gold will have its ups and downs this year. But, with decreasing supply and increasing demand for the commodity (see: “India: What Is It Doing With All That Gold?”), it will be a great year for gold.
With all this in mind, I continue to see the shares of quality junior and senior gold producers as a bargain at their current “cheap” prices.
