$3000 GOD
The combination of increasing geopolitical concerns and the potential the economy may be slowing more than expected sent the VIX [the Chicago Board Options Exchanges (CBOE) Volatility Index] back up to 24, and drove a decline in equities as investors turned to bonds and gold both traditional investor perceived safe havens. As if on cue, spot gold rose about $50 between Feb. 11 and Feb 15, and jumped again on Thursday, Feb. 17, soaring past $1,900, for the best performance in eight months. 1-month spot gold price. Source: Kitco What impact will the expected Fed rate hikes have on gold? Well, initially they will be negative. Because gold does not pay a dividend or a yield, some investors will shift funds over to government bonds whose yields are already going up in anticipation of rate hikes. But remember what happened when the Fed tried this in 2018. They only got to 2% when the stock market tanked, prompting them to reverse course, and re-instate low interest rates. We predict the same thing will happen this time. When it does, get ready for the next big move up for gold. Its interesting to note that gold has in fact performed quite well despite recent increases in US 10-year Treasury yields and the US dollar index DXY, both of which are strong determinants of the gold price, from multi-month lows. Why? According to Bank of America strategists, There are significant dislocations buried beneath headline inflation, interest rates and currency moves, raising the appeal of holding the yellow metal in a portfolio and supporting our $1,925/oz average gold price forecast for 2022. Analysts at UBS, a Swiss bank, think the gold price is being supported by elevated demand for portfolio hedges, noting that gold has done better than other portfolio diversifiers including bitcoin, whose value lately is more closely correlated to stocks than previously. As for what could propel gold even higher, the loss of faith in central banks policies to fight inflation is one potential demand driver. Of course a recession, either Fed-driven or through other means, would also be very bullish for the precious metal. A couple of other fun facts in favor of gold right now: 1/ Russia has made some big moves out of US dollars and this may be emboldening Putin on a potential invasion of Ukraine. Consider: in 2013 Russia received dollars for 95% of its exports to Brazil, India, South Africa and China. After a decade of de-dollarization, only 10% of that trade is in greenbacks. Russia has also built its own payment settlement system outside of SWIFT, that enables it to circumvent US sanctions. 2/ A number of US states have removed sales taxes on precious metals purchases. Ohio and Texas have gone so far as to diversify their public pension funds with gold investments. Read more at Birch Gold Group However you look at, the outlook for gold looks extremely positive, which is why we continue to hold physical gold and invest in quality junior gold explorers that can offer outstanding leverage to rising gold prices. Richard (Rick) Mills