Gold Rush: Capitalizing on the Advantages of Investing in Precious Metals
Updated April 30, 2024
Fast forward to 2024, and the lustre of gold as a valuable investment continues to shine bright. Despite the roller coaster ride that the global economy has been on, the allure of gold remains unscathed. The factors that made gold a tempting investment in 2023 remain, while new dynamics have risen to further cement its status as a safe haven.
Geopolitical tensions continue to fan the flames of uncertainty. The Russia-Ukraine conflict and the escalating tensions between China and Taiwan persist, adding to the shroud of unpredictability. In such turbulent times, gold remains a reliable refuge for investors.
Examining the technicals, the previous year’s bullish MACD crossover on the monthly charts remains positive, indicating an ongoing upward trend for gold.
If gold sustains its close above 1960 monthly, the path towards the 2400 to 2700 range remains intact. Tactical Investor March 2023
Gold has achieved the above milestone, so pullback should be viewed through a bullish lens, and the next stop is 2400
Meanwhile, silver, which lagged in the previous year, has started showing signs of waking up. It seems likely to outperform gold bullion in percentage as the gold market sizzles.
In terms of gold stocks, GFI and DRD, which were exciting plays in 2023, have maintained their allure into 2024. DRD, despite its volatile nature, has shown promising returns, establishing itself as a lucrative long-term player. Meanwhile, new entrants like B2Gold Corp and Agnico Eagle Mines have come into the spotlight, offering exciting prospects for investors.
The Fading Dollar and Rising Inflation
The long-term outlook for the US dollar, set to hit a long-term peak in 2023, continues to wane. This depreciation makes gold an even more appealing alternative investment. Furthermore, with inflation continuing its upward trajectory and the Fed’s interest rate hikes proving insufficient to stem the tide, gold’s role as a hedge against inflation is more critical than ever.
The Golden Future
With a fusion of technical, geopolitical, and macroeconomic factors, gold looks set to remain a solid bet for the years to come. The volatile stock market, burgeoning inflation, and geopolitical instability all contribute to the appeal of gold as a stable investment.
In summary, gold’s value as an investment in 2024 remains as solid as ever. Its ability to act as a safe haven in times of economic uncertainty, coupled with bullish market trends and the declining power of the US dollar, makes it an investment worth considering. Whether you’re a seasoned investor or a newbie looking to diversify, the allure of gold is hard to ignore.
Now, let’s look at this topic from a historical standpoint. Learning from the past helps us avoid making the same mistakes and might even lead to future gains. Plus, it gives us a clear picture of what we did in real time, offering insights into our actions and decisions as they unfolded.
The advantages of investing in gold
The following words were published in November 2003. The trend of gold appeared to be in a super bull market when evaluated in dollars, yet when examined in other currencies, it revealed the signs of the “impending world currency crisis”. These early tremors are only the beginning of a major upheaval that is unfolding at a gradual pace. The once-dominant dollar has been overthrown. Other currencies offer only temporary refuge as the rodents abandon one sinking ship for another, which has only begun to leak but is swiftly taking on water. The final outcome will be harsh, with all major currencies on the verge of collapse.
Ultimately, gold will rise in value in every major currency. At this point, the feeding frenzy will begin for gold bullion and shares. Simultaneously, this will lead to a slow progression towards the panic stage, where gold will genuinely take flight. Ultimately, observing spikes of $100 or more in a single day will be no surprise. I shall begin with the presentation of charts representing weak currencies. Surprisingly, gold has been gaining value in all major (weak) currencies globally while losing value in stronger currencies.
John Tyler 2003 On The advantages of investing in gold
I want to throw my support behind Sol; you’d better listen, or the golden opportunity of a lifetime will be missed.
We were fishing the other day, and my mate Nifty Neville, the plumber, was quizzing me on investments as we toiled in piscatorial heaven, dragging the next few day’s dinners from the ocean bottom. (Nifty Nev inspired me to write The Nifty 50 Trading System. He was about to spend $8000 on a black box system that promised immediate fortune. This mob went out of business the next month).
The advice always goes both ways, and Nifty Nev gave me his spiel on the stupidity of buying gold. He told me how, twenty years ago, one of his workers bought a miniature gold ingot and wore it on a chain around his neck. He had bought it at the top of the last Bull Run when gold hit $800 an ounce.
Nifty Nev was right and wrong. Timing is crucial. Don’t get caught buying at the top!
Multiple forces at work are combining to produce a typhoon of gold speculation:
Gold will rise in value across all currencies and become the only money of value. Inflation will become more apparent in everyday prices of consumer goods. All the big miners will have few hedged forward positions. Barrack is now unwinding its giant forward hedge book. This has acted as a pressure release valve on recent gold runs. This will be gone.
Significant new gold discoveries are harder to come by. Miners are going deeper.
I could continue, but there is still a nasty fish infestation for Nifty Nev and me to work on. As we were pulling in the lines, the Nifty line when taught. The reel screamed—an 80 lb. The line was snapped as if it were gossamer.
Gold is the big one; don’t let it get away.
George Paulos, 2003 on The advantages of investing in gold
In the US, it is clear that gold is trending up and has been in a bull market for close to 3 years. However, the technical picture is less clear when measured in international currencies. Like most commodities, gold is priced in dollars on global markets, but many currencies are now appreciating against the dollar. This makes gold investing less profitable to investors living in countries with strong currencies.
Sol makes a note of the strength of the South African Rand. This has implications beyond just the price of the metal in that country. A quick look at the major South African gold stocks (DROOY, HMY, GFI) shows that they have dramatically underperformed the North American shares over the last year. The strong Rand pushes up costs for SA miners and hurts profitability; therefore, those stocks have been hurt as a result. The lesson here is that gold mining stocks benefit when the host country’s currency weakens. Countries that have significant exports of commodities will probably experience stronger currencies. This makes US gold mining stocks more attractive and gold mining stocks in commodity-exporting countries less attractive.
Currencies will ultimately weaken against gold.
All global currencies are now fiat. That means no currency is convertible to a fixed quantity of gold or another commodity. This makes it easy for governments to manipulate money. It is often in the interests of exporting countries to have weaker currencies to sell their products at a relatively lower cost with respect to competing exporters. This leads to competition between countries to depreciate currencies at an ever-increasing pace in a race to the bottom.
This is known as a beggar thy neighbour policy. The net result of these competitive currency devaluations is a general rise in commodity prices. Gold gets a double boost in this situation because it is both a commodity and a currency. Private investors will likely rush to gold to protect their purchasing power.
Two possible scenarios could cloud the picture for gold, however. One would be a general trade war with competing countries erecting trade restrictions and tariff barriers. We are already seeing some of this happen with the Bush Administration’s steel and lumber tariffs.
If this escalates, it could create a global recession that might collapse commodity prices as trade declines. Another scenario where widespread defaults on private debt obligations would also cause a recession and a possible decline in commodity prices. Gold may or may not do well under those circumstances.
As all countries crank up the currency printing presses in a vain attempt to fight the effects of global overcapacity, we will experience both inflation and deflation simultaneously. Inflation will likely raise the prices of commodities, energy, and other necessities of life.
Inflation in these items will cut into disposable income and cause deflation to continue in manufactured goods and may spill over into debt-financed goods such as autos and homes because of the resulting cash crunch. Gold will undoubtedly do well under these chaotic circumstances as the traditional safe haven against uncertainty.
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