2016 is a clear, painful lesson in diversification for people who are over-invested in stocks.
I don’t point this out to rub salt in any wounds, especially since I have stocks among my retirement assets too.
My goal is to help you prepare for what might come next.As the old proverb goes: hope for the best, but prepare for the worst.
Increasingly, it is looking like we are sliding straight into bear market territory.
If you intend to need your retirement assets in the next few years, it would be wise to expand your portfolio to include precious metals.
Here is why.
Economic Weakness Here and Overseas
According to Bloomberg, our stagnating global economy is taking the steam out of any U.S. expansion.
This makes it far less likely that the U.S. Federal Reserve will raise interest rates anytime soon. Last week’s gloom was capped by mixed jobs data out of the U.S. Bureau of Labor Statistics, which reported that the economy is barely creating enough jobs to keep up with population growth.
This trend is sending the dollar lower and increasing the attraction of gold as a safe haven asset. No wonder the yellow metal is currently hitting its highest price in 7 months.
Whether inflation or deflation is ahead, gold still holds its appeal. Forbes reported last week that gold can perform well in deflationary periods, as investors can flock to alternative assets during times of financial uncertainty and chaos.
Supply and Demand Favors Gold
American investors are driving a lot of new demand for gold. The U.S. Mint reported that 124,000 ounces of American Eagle gold coins sold in January, up 53.1% over the previous January.
We are now entering gold buying season in China as Chinese citizens ring in the New Year. Indian citizens are also getting ready for their “festive season.” As these two countries are among the largest consumers of gold in the world, this could mean near-term upward pressure on gold prices as individuals buy for savings and gifts.
Analyst Shane Obata recently wrote that gold mine production is set to decline in coming years due to the recent lows for metals prices. Even if gold prices appreciate rapidly in 2016, adding new gold production could take years. This is simply because of the huge time and capital investment required to start new mine projects or to restart shuttered mines. These are major undertakings.
Bull or bear market… will your retirement plan be ready in 2016?