Gold prices hit one-year highs of over $1,345/oz on Monday after North Korea successfully tested its sixth and largest nuclear device.
North Korea leader Kim Jong Un seems undeterred in his quest to develop a hydrogen bomb that can be delivered via intercontinental ballistic missile. He is said to be preparing for another long-range ballistic missile test soon.
“Safe-haven demand is the order of the day,” Simona Gambarini, a commodities economist at Capital Economics Ltd. in London, said by phone. “If tension continues to escalate, prices could rally above $1,350 and stay there…”
Investors are understandably rattled and looking for alternatives to spread their risk. In Washington, U.S. Defense Secretary James Mattis said that any attacks on the U.S.A., Japan or South Korea “will be met with a massive military response, a response both effective and overwhelming.”
Hedge fund legend Ray Dalio thinks war with North Korea is a real possibility and urges investors to hedge their risk in case geopolitical tensions escalate fast. Dalio is bullish on gold and recommends investors consider safe-haven assets right away.
“If you don’t have 5%-10% of your assets in gold as a hedge, we’d suggest that you relook at this,” said Dalio.
“This recent event has injected another element of uncertainty,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp. in Singapore. “Gold as a safe haven thrives on uncertainty.”
If you’ve hit some home runs in stocks in 2017, it could be time to consider physical precious metals. They could help you diversify with a recognized safe haven asset and build your family’s future.
THREE WALL STREET BANKS WARN MARKET BOOM IS AT AN END
Wall Street banks HSBC, Citigroup and Morgan Stanley recently warned that the end of the market boom is fast approaching.
The similarities between today and the 2008 financial crisis are striking.The markets are at historically high levels versus GDP. Investors are pricing assets based on specific risks and ignoring the big picture.In addition, investors appear to be paying less attention to earnings. Citigroup analysts say the markets are on the cusp of entering a late-cycle peak before a recession that pushes stocks and bonds into a bear market.
The Federal Reserve is expected to go slow on further interest-rate increases, to avoid cutting the knees off the economy just when analysts believe it is stretched to the limit. So far in 2017, this hesitation to raise rates as planned has been a boon to precious metals.
2017 is set to be the first year in which bullion has beaten stocks since 2011. In 2011, gold went up 10.2 percent while the S&P 500 finished flat. Gold prices could continue to advance on a falling U.S. dollar and falling U.S. interest rates, say some experts.
RISING DEMAND MEETS FALLING SUPPLY
Gold supply from mines has fallen dramatically this year, bolstering prices of the precious metal in the face of rising geopolitical tensions. ANZ’s senior commodity strategist Daniel Hynes says growth in mine output is at its lowest point since the financial crisis. Hynes notes changing government policies in producing countries are creating uncertainties and hurting supply.
At the same time, consumer demand is improving. According to the World Gold Council, total bar and coin demand grew 13 percent in the second quarter of 2017. This is driven by a strong 56 percent increase in Chinese demand.
For investors seeking to hold and feel their wealth in their hands, owning physical gold can give you a level of emotional security and peace of mind no piece of paper or computer screen can.
ARE YOU SITTING ON THE SIDELINES?
If you have been sitting on the sidelines while gold has rallied, remember that geopolitical risks are rising. U.S.-North Korea tensions are of serious concern, with no clear path to a safe resolution yet. Major Wall Street banks are seeing signs that the bull market in stocks may be final running out of steam. Valuations are ignored and global risks are swept under the table.
The parallels between 2007-8 and today are compelling, and the former head of the Fed Alan Greenspan says the bond market is headed for a crash.
Owning physical gold is something every retirement investor should consider if they are seeking a safe haven from today’s challenging conditions.
