We’ve been spilling a lot of digital ink on gold of late. And for good reason.
The yellow metal is emerging as big winner from global central bankers’ zero bound interest rates and governments’ trillion dollar stimulus packages.
After gaining 4.7% yesterday, overnight gold rose 4.3%.
Year-to-date that puts bullion up 7.1%. How does that compare to the ASX 200? Have a look at the chart below:
Please note that gold is the black line in the chart. The ASX 200 is the, well, gold line.
Confusing colour scheme aside, you can see that the ASX is down 26.6% compared to gold’s 7.1% gain.
Gold is enjoying tailwinds from almost every direction
We’ve long pounded the drum for gold. And with monetary madness in full swing, we’ll keep pounding away as gold looks likely to keep rising from here. Though almost certainly not in a straight line.
At the moment gold is enjoying tailwinds from almost every direction.
Central banks are still active buyers. And investors large and small are looking to up their gold holdings as both a safe haven asset, and as a hedge to a potential surge in inflation.
That’s right. After failing to stoke inflation for years, we may soon see it run far above central banks’ 2–3% target ranges. You can only print so many trillions of new dollars (or yen, euros, etc.) before it begins to erode the fiat currencies’ buying powers.
But you cannot magic more gold out of thin air. That makes gold a highly attractive and fairly liquid asset to own as inflation fears rise.
That’s welcome news for gold miners. Though keep in mind gold stocks carry their own investment risks. Not every gold miner will see its share price rise if gold keeps trending higher. Some will fall.
If you’re considering investing in the gold sector, you may find The Rum Rebellion editor Greg Canavan’s free special report useful. It’s titled ‘How to Pick Winning Gold Stocks’.