Gold Prices Remain Stressed, Presenting Great Opportunity for Long Term
Don’t let the noise persuade you otherwise—gold could still be worth it as an investment. Mark these words: in a few years, we could be looking at $2,000 gold prices.
It’s important for investors to look at stressed assets. Sometimes they can provide the greatest return.
As it stands, gold could be one of the most stressed assets out there.
Gold Prices Tell Us It’s Stressed
Just look at it from price point of view, for example; gold prices remain 30% below their peaks in 2011. There are very few assets like this that are trading this far below their recent peaks.
Stock are at their all-time highs and are extremely overvalued, bonds remain in bull-market mode despite interest rates increasing, and the housing market has gained a lot of strength as well (it’s not near highs yet, but it’s getting close).
Central Banks Continue to Own It
Look at gold prices from a confidence perspective, too.
This means determining if gold is held by long-term buyers, and whether they believe it to be a store of value.
The mainstream press and institutions will tell you it’s not worth it. They will tell you the yellow precious metal “doesn’t provide any yield.” They will ask, “Is there any point in owning the metal?”
But gold is still respected by long term-buyers.
If you ask central banks, they will give you at least 33,499 reasons to look at gold.
You see, central banks hold a lot of gold. In fact, as per the most recent data, they hold 33,499 tons of it. And their holdings have been increasing. They have been net buyers of the precious metal since the financial crisis. (Source: “World Official Gold Holdings,” World Gold Council, last accessed November 23, 2017.)
What’s Ahead for Gold Prices?
We are definitely living in interesting times; if you tell someone that gold prices could reach $2,000, they will ridicule you. Mind you, that’s just 54% away from current levels.
But if you tell someone that Bitcoin will soar above $11,500 by mid-2018—that’s roughly 43% above the current price—you are asked, “How do I get in on this now?” Keep in mind that the crypto currency has soared several thousand percent in the last couple of years! (Source: “Crypto Bull Tom Lee Doubles Bitcoin Price Target to $11,500,” Bloomberg, November 22, 2017.)
Let me ask one question: assuming there’s a sell-off in the stock market and the bonds market in the next few years, where do you think investors will rush too?
Will they go to assets that are undervalued or rush to buy overvalued assets? Its very plausible that they might rush towards assets that are undervalued and were ignored all along. Gold could be that asset.
Dear reader, I continue to be bullish on gold prices. I truly believe that in the next few years, gold could really shine.
I can’t stress this enough: don’t pay too much attention to the noise. Pay attention to the facts. They make a compelling case for having some gold in your portfolio.