There is a rare situation hitting the marketplace and it bodes well for investors in the fourth quarter of 2019. Both gold and the US dollar are on the rise, showing promise to continue this upward trend for the remainder of the year and into 2020.
Unique circumstances are leading to this infrequent happening and it could indicate good things for anyone owning precious metals and the US economy at large.
Although the simultaneous rise of the U.S. dollar and gold is atypical, MarketWatch’s Ivan Martchev notes that the rare occurrence is easy to demystify. While Federal Reserve rates have previously been the deciding factor in the greenback’s value, Martchev points to the Broad Trade-Weighted Dollar Index as a key gauge that explains why both assets are standing strong.
Martchev lists China as a prominent example, as its ongoing devaluation of the yuan has pushed global central banks towards quantitative easing (QE). The European Central Bank’s loose monetary policies and negative-yielding European bonds have done plenty to weaken the euro and minimize the appeal of bonds as a safe-haven asset, leaving gold and the plummeting Treasury as the only alternatives.
The metal has gained close to 20% since the start of the year, and Martchev sees multiple ways for gold to gain another 15% to 20% over the next 12 to 18 months. One of them would be a continuation of the ECB’s QE program, with even faster moving gains if the Fed starts printing money as well. Martchev also lists the massive balance sheet of global central banks as an ongoing risk that could result in hyperinflation and send gold to new all-time highs. These highs could also be reached if the U.S. enters a recession in the near future, something that both Fed officials and independent experts see as a likely scenario.
These new all-time highs for gold in the near future make it an excellent opportunity to invest now before the price starts to rise. Gold has always been a solid investment and continued worldwide factors always seem to assist in it’s steady gains.
The upward trend of the dollar is interesting and also worth paying attention to over the remainder of the year.
Article courtesy of Birch Gold Group