What Could Drive a 2016 Rally In Gold? - Investing Shortcuts

What Could Drive a 2016 Rally In Gold?

By December 22, 2015Investing, Retirement

Gold has been under pressure for some time now. As the first interest rate hike by the Federal Reserve is upon us; the gold market may potentially carve out another low before finding more solid footing.

The notion of the first increase in interest rates in nearly a decade has weighed on the yellow metal. The dollar index has been on the rise as well as the euro currency has continued to move towards parity with the U.S. currency.

Stocks have been moving back towards all-time highs and risk appetite remains robust. 

These factors beg the question: What could possibly drive a significant rally in gold this year?

While we are of the opinion that there are numerous issues that could potentially fuel buying in gold and the precious metals complex, below are three key issues we see potentially driving buying in gold this year:

  • Inflation/deflation: The globe has been awash in cash for some time now. Loose monetary policies in the U.S., European Union and elsewhere have flooded the world with capital. While all of the money printing and currency devaluations have thus far not spurred on inflation, at some point price pressures will come to roost. This could begin to occur sometime this year, if and when oil prices begin to stabilize. On the other hand, however, if the spiral of declining commodity prices does not come to a halt this year; investors may buy gold and other precious metals to potentially hedge against deflation.
  • Equity market sell-off: Stocks have been marching higher for years now with seemingly nothing standing in their way. Even after a significant sell-off in August and September of this year, the U.S. stock market has recovered and is currently not far from all-time highs. We do not expect this trend to continue. As the Fed initiates lift-off, it is plausible that investors may begin to pull cash out of stocks. As rates go up, the competition for investors’ capital will increase. At current levels the risk/reward in stocks may not be enough to continue to drive equity buying. In our opinion, as the tightening cycle gets under way; investors are likely to begin looking for more alternatives and gold and silver may represent a significant bargain at current levels.
  • Further changes in the global balance of power: As the world’s second largest economy, China will continue to play a large role in the global financial landscape. With China’s currency recently being admitted to the IMF’s Special Drawing Rights and with China continuing to buy large amounts of gold bullion, we suspect that the nation will continue to cement its place among the global economic elite. As further changes are seen in global trade and as more nations potentially move away from the dollar; investors may potentially seek out gold and other precious metals. These issues may potentially weigh on the dollar index and the greenback could potentially start moving lower again in the direction of its long-term trend.

Whatever the case may be, gold has a number of bullish factors at play-contrary to what many of the “talking heads” on television may say.

Whether it takes place in 2016, the following year, or the year after that; the gold market will shine once again.

Global debt, inflation and deflation and changing geopolitical landscapes can all play a hand in potentially higher gold prices.

The only question is: Would you rather get involved in gold and precious metals at current price levels or wait for prices to rise substantially before buying?

If you own gold, silver or other precious metals already; now may be the time to add to your holdings. If you don’t own physical gold or silver yet, we feel now is the time to get started.

You can even buy and hold physical gold and silver in your IRA account. In fact, this may be the best way to acquire and build a precious metals portfolio.

Don’t wait for prices to go up…

Take a look at this company —–> They are doing some really incredible things to help investors protect their IRA portfolios —- > www.advantagegold.com

Jeremy Blossom

Author Jeremy Blossom

Jeremy Blossom has been building ideas to grow businesses for more than 15 years. For over a decade Jeremy was active in the financial industry and his understanding of the financial sector is vast and deep. Under his leadership, he delivers result-focused strategies and executions that are designed to do one thing: make clients more profitable.

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