Gold recently hit a two-year high for a myriad of reasons. Chief amongst them is Brexit. Great Britain’s departure from the EU spurred investors to dump cash into gold and other “safe haven” investments. The global economic and political landscapes are anything but steady. This is precisely why many think the value of gold will continue to rise in the short-term.
Brexit Fears Will Continue to Drive Money to Gold
To say that investors were a bit spooked by the Brexit phenomenon would be an understatement. Money managers around the world shifted considerable amounts of money out of stocks and other risky investments into gold in the immediate aftermath of Brexit.
Uncertainty has fueled gold investment throughout history. This summer’s Brexit was no exception.
Investors and political analysts aren’t quite sure how the Brexit drama will play out in the near-term or in the years and decades to come. This is precisely why so many savvy investors are mitigating risk by parking their money in gold and other less volatile investments.
There is also a looming fear that France will also consider exiting the EU in a year or two. If such a “Frexit” occurs, the value of gold will likely continue to climb even higher. The mere rumors of a so-called “Frexit” will likely prove sufficient to fuel a rush to gold.
Gold Aside From Brexit
Brexit is not the sole reason why gold recently hit two and three-year highs. The United States government bond yield is at an all-time low. Yields on United States Treasuries are at 30-year lows.
There is rampant economic uncertainty seemingly everywhere investors look. Gold has been and likely always will be one of investors’ most favored hedges against financial market uncertainty as well as general economic and political uncertainty.
Furthermore, William Dudley, the President of New York’s Federal Reserve recently went on record stating that the central bank is in no hurry to hike interest rates. His comments come in response to low inflation and a sluggish United States economy that has yet to fully rebound from a seemingly never-ending recession.
The Prospect of Profit Taking
Though some argue that the value of gold will either level off or drop as gold investors take their profits off the table, such a happening would merely serve as a temporary setback.
The bottom line is that investors take profits off the table after short-term increases in stocks, commodities, mutual funds and just about every other type of investment. As long as the global economic and political climates become murkier, gold will still receive its fair share of “spooked” money.
Consider the Experts’ Advice
UBS recently upped its gold price predictions for the short-term as well as the long-term. The investment bank forecasts increases in gold’s value by the end of 2016 and all the way on through 2020.
UBS financial gurus were not shy when stating their belief that gold recently entered the initial stages of a new bull-run. Several other fund managers have gone on record predicting that the price of gold will hit an all-time high in the next year and a half while global bond yields remain low to negative.
Fixed income bond yields are no longer a solid bet. Though the holding costs for gold and other precious metals poses the risk of generating little-to-no yield for investors, such a “zero cost” is better than the negative cost posed by bond yields.
It is clear that gold is attracting a chorus of boisterous market bulls that will likely grow in volume over the next weeks, months and possibly years.
Gold Will Always Have Value
Perhaps the best reason to invest in gold is that it cannot be printed. Gold production and inventory are falling across the globe while demand is spiking, especially in China and India where urbanization and income levels continue to rapidly grow.
The fact that there is no new supply of gold bodes well for the precious metal’s value across the short-term as well as posterity. There is a growing fear that the interdependent nature of our global economy has drastically heightened risk in every sense of the word.
In the end, gold will always be valued for its wide-ranging utility. Though gold is certainly aesthetically pleasing, it has an array of uses beyond jewelry. Gold is used in the context of space exploration, medicine and a myriad of industrial settings. Gold just might be the safest and possibly the most profitable place to park your money in the near future.
Regards,
Ethan Warrick
Editor
Wealth Authority
