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Tuesday, February 13, 2018

Stock Market Fears Reinforce Gold According to Famed, Frank Holmes

As stocks faced a near 1600-point correction, Frank Holmes reminds us of his time-proven advice to hold 10% of one's portfolio in gold.

frank holmes stock market fear good for gold

After a prolonged record-breaking performance, the stock market was finally taken down a notch by the near-1600-point correction that started earlier this month. As panic spread among investors, gold emerged as the standout asset for the duration of the scare.

Frank Holmes recently wrote in a Forbes article that gold's performance against plunging stocks is expected, but no less impressive, and reinforces his time-proven advice that investors should hold 10% of their portfolio in gold.

As the downturn continued, all of the major averages turned negative for the year, with the Dow experiencing its sharpest daily decline ever. The article writes that the CBOE Volatility Index, sometimes referred to as the "fear index", also spiked to its highest point on record, an increase of almost 100%. Given the severity of the drop, experts scrambled to understand what caused it and whether it was a one-off scenario, with explanations ranging from overbought conditions to recessionary concerns.

As opposed to worries that the economy is struggling, Holmes believes the selloff might have been caused by the earlier report from the Labor Department, which showed the highest wage growth since the financial crisis. This added fuel to ongoing concerns that inflation is building up after a lengthy absence, a notion Holmes supports.

The article notes that all of the major indices, such as the consumer price index (CPI) and its alternate version, show that inflation is trending upwards. An inflationary environment wreaks havoc on traditional havens such as Treasury yields and even cash, leaving gold as one of the few assets investors can turn to.

Holmes says that inflation expectations have already given gold a leg up, which could be just the start if the cost of living shoots up. Analysts at BCA Research agree, adding that gold will serve as an important hedge when the stock market turns bearish in the second half of 2019.

Holmes, however, believes gold bulls might not need to wait that long given the amount of volatility and fear already seen in the markets. Despite reassurances that the fall in equities was a momentary lapse, the flight to gold shows that investors are keenly aware of the stock market's propped-up position.

Even with all of its gains, Holmes points out that the ever-steady gold continues to outperform the equity market by a large margin in the 20-year period. Since its untethering from the dollar in 1971, the metal has also beaten out every other asset class, including cash, commodities and bonds, over multiple time periods. The article states that these statistics exemplify gold's low or negative correlation to other assets and show that the metal allows investors to turn a profit in a wide variety of situations.

Tuesday, January 23, 2018

What the World Gold Council Predicts for Gold in 2018

After its biggest jump since 2010, the World Gold Council outlined several factors that could propel gold even higher in 2018.

Gold rounded up the previous year with a 13.5% gain, making it the second-best performing asset of 2017 after stocks according to an article on BusinessDay. After its biggest jump since 2010, the World Gold Council outlined several factors that could propel the yellow metal even higher in 2018.

Aside from a belief that gold's gains are sustainable, author of the article Allan Seccombe writes the metal also benefited from geopolitical flareups, which included tensions in the Middle East as well as the U.S.-North Korea conflict. Aiding gold further were expensive stock valuations and a weaker dollar, the latter having plunged towards the end of the year. The greenback appears set to continue along that path in 2018, having recently reached a three-year low.

The WGC said that the dollar's decline will be perpetuated by market expectations of a global recovery which outpaces U.S. growth. In response, central banks around the world would look to quickly unwind their loose monetary policies, said the council. Although higher rates are seen as a negative for gold, Seccombe writes a reduction in quantitative easing worldwide would increase volatility, sending investors towards the safe haven of gold.

Global growth is a key factor that could underpin the price of gold in the new year states the article. A rise in incomes leads to more demand for physical gold in the form of jewelry, as well as industrial demand for gold-containing technology, such as smartphones and tablets. Together with expanding economies in the U.S. and the EU, a shift in China's economy from investment-driven growth to a consumption-based one should act as a major boon for gold.

The WGC added an overheated equity market to the list of potential tailwinds. Amid concerns that a correction in equities is looming, the council said that investors could particularly benefit from exposure to gold in order to protect themselves against major losses. Greater ease of access to gold, facilitated by various platforms, is also expected to boost demand for the metal.

Noting that the forecast for gold in 2018 has thus far only been modestly higher, Sharps Pixley CEO Ross Norman said that gold has rarely been more important to own. To Norman, the key for any gold investor is patience – the CEO compared gold's current price elasticity to that of the 1990s, reminding us that the turbulent 2000s followed after.

Stressing that the best is yet to come for gold, Norman predicted an average of $1,358 an ounce in 2018, adding that it could climb to $1,400 at some point during the year.

Wednesday, January 3, 2018

Gold on Track for Best Year Since 2010

A struggling U.S. Dollar helped boost gold at end of year, acting as the metal's biggest driver.

gold breaks new highs

As seen on Reuters, gold recently hit its highest level in 2 and a half months, putting it on track to its best year since 2010. The metal rebounded towards the end of the year due to a myriad of factors, most of which, according to the article, had to do with the U.S. dollar.

The greenback had a difficult year as several geopolitical events subdued it. Aside from increasing the appeal of owning gold, the article states that the U.S.-North Korea conflict also harmed the dollar, giving more ground to the yellow metal.

Persistent low inflation in the U.S. remains a significant headwind for the dollar. The article references Georgette Boele, an analyst at ABN Amro, who said that inflation concerns allowed gold to thrive even after three interest rate hikes by the Fed in 2017. The same concerns have also impacted market sentiment, letting gold hold its ground against rate hike predictions in 2018.

Boele added that the dollar remains the most important driver of gold prices, followed by yields. Aside from a dollar that didn't profit from successive rate hikes, 2017 also saw weak trade and meager yields, both of which bolstered gold. While Boele said that a recovery in the dollar could harm gold prices in 2018, it's worth noting that the issues placing pressure on the greenback are still ongoing.

As the dollar had its worst showing in three months with a potential to post its worst year since 2003, gold breached the $1,300 level to hit $1,302 an ounce this past Friday afternoon. The article notes that ScotiaMocatta's technical team pointed to $1,306, gold's October high, as the next level gold could capture before the year ends.

The analysts said that gold has benefited from technically driven momentum, adding that the metal broke its 100-day moving average in a markedly positive development. With enough strength in the closing days of 2017, gold is poised to have its best month since August.

Other precious metals also enjoyed a favorable year, with palladium's gains standing out the most. The metal recently hit $1,072, its highest level since February 2001, amid worries over availability after years of market deficit. Palladium enjoyed an unusually large premium over platinum in the fourth quarter, with the latter rising 3.8% this year.

Silver's gains were somewhat higher, having risen 6.5% so far this year, last closing at $16.97 an ounce.

Tuesday, December 12, 2017

How Gold Could Fix Turkey's Currency Issue

Forbes' Steve Hanke believes gold could make the Lira a worthwhile currency.

According to Forbes contributor Steve Hanke, Turkey's currency continues to serve as its country's Achilles' heel. Despite the Turkish president's political maneuvering, Hanke claims in a recent article that there is no hiding the truth from the Turkish people: the lira is effectively a junk currency and a bad choice of wealth storage.

In the article, banking data shows up to 70% of deposits in Turkey are made in a foreign currency. The lira has been on a declining trajectory since 2008, and the Central Bank of Turkey was forced to replace its diminishing foreign assets with lira denominations, further complicating affairs.

Hanke believes that, in order for the country and its President to yield real power, these rampant currency issues need to be fixed. And despite the extent of Turkey's currency struggles and the length of time that they stretch, the solution might be a simple one.

The lira could be made into a worthwhile currency, says Hanke, by attaching a gold standard to it. Although some show no recollection of it, Hanke reminds us that gold was a central part of money until the 20th century, owing in no small part to its ability to preserve purchasing power.

Ever since gold was abandoned by the official monetary system, the article states that there have been calls to restore it to its former role, with some predicting that the yellow metal is bound to return. To Hanke, the most infallible way of using gold to back Turkey's economy is in the form of currency boards.

These boards have existed in some form in over 70 countries and, when applied correctly, allowed for increased financial discipline and higher growth as opposed to a system revolving around central banks.

The article reads that, for optimal effect, the currency board would be stationed in Switzerland to improve regulation, and its purpose would be to issue notes and coins wholly backed by gold reserves. Furthermore, the issued currency would be convertible to gold by Turkey's citizens upon request and without fee.

Independent from Turkey's politics, Hanke's proposed board would alter the country's everyday financial dealings without assuming the burden of the government's obligations. And, so as to remove any doubt over bullion coverage, the physical gold tethered to the board's denominations would be held in an internationally-certified gold warehouse or a similar institution.

With the added flexibility of choosing whether the currency board would be government-run or private, Hanke believes that Turks would have an all-encompassing way of returning to a system that is proven to create more stable and organized economies.

Tuesday, November 21, 2017

Seeking Alpha Writer Sees 2 Drivers That Could Send Gold Prices Higher

Gold prices could steadily rise in the short term and long term.

Seeking Alpha's Clif Droke sees two solid drivers that could send gold prices higher, one in the shorter term and one over the long-term.

The short term driver is a potential reignition of safe-haven demand due to a build-up of weakness in stocks.

Some have expressed concerns that the stock market's run is built on overly-optimistic projections, and the recent surge in 52-week lows posted by NYSE-listed stocks corroborates this. In this article, Droke expresses that the broad market faces internal selling pressure, and a continuation of this weakness could lead to a familiar flight to the safety of gold as stock market indices slump.

As his long-term driver, Droke points to an unusual combination of fear and inflation expectations. While these might not seem to go hand-in-hand, Droke argues that they have been the yellow metal's biggest backers since last year.

After a jump in prices brought on by the merciless campaigns of both presidential candidates, gold assumed a downwards trajectory when Donald Trump was elected in November. The "Trump bump" saw investors abandon safe-haven assets in order to load up on equities, riding on the promises of a stronger and more stable economy.

However, the article points out that this faith has since largely evaporated amid political concerns, including uncertainty over Trump's tax plan and its ability to stimulate the markets. A strong booster for gold on its own, political uncertainty in the U.S. is aided by inflation expectations, which Droke feels are significant enough to facilitate a gradual increase in gold prices.

While the markets aren't expecting high inflation in the near future, Droke reminds us that present-day inflation is still markedly higher than it was two years ago when deflation was on the horizon. Furthermore, signs such as a lessened appetite for money point to an upcoming increase in U.S. inflation.

Droke notes that the demand for money was at its highest immediately after the credit crash as the world economy looked to rebuild itself. Since then, economies around the world have improved, led by developed Asian countries – in turn, demand for money has subsided as investors braced for higher inflation, improving the outlook for gold over the longer term.

Despite recent dips, Droke points out that the gold price is far above its December 2015 lows and is closer to its 4-year high than it is to the low. Cracks in the equity market, concerns over the U.S. political situation and a rise in inflation expectations should provide ample support for the yellow metal moving forward.

Wednesday, November 1, 2017

Why Iran Should Go For Gold

Forbes contributor Steve Hanke sees gold as an optimal solution for Iran's economic problems.

iran should go for gold

As Iran toys with the idea of a change in currency, Forbes contributor Steve Hanke refers to the slated reforms as nothing more than "a great illusion". According to the bill passed by Hassan Rouhani's government last December, Iran's national currency would be changed from the rial to the toman. This would also require a reduction of Iran's unit of account, since one toman equals ten rials.

Hanke states this is merely another cog in the engine of Iran's economic dysfunction, a problem that has persisted since the Islamic Revolution of 1979. Since then, the rial has officially lost 99.8% of its value as the country continues to struggle with high inflation. Although official figures place the annual inflation rate at 9.6%, Hanke estimates it closer to 20%.

The article clearly shows that something needs to change with Iran's economic system. Adopting a foreign currency such as the U.S. dollar or the euro would be one way to fix the currency issues, but Hanke points out the solution is politically unacceptable.

And while it might seem that there is no easy fix to Iran's economic problems, Hanke believes that the optimal solution is simple and unjustly overlooked: a return to the gold standard.

The article states that the reintroduction of gold as currency has been a talking point for some time now – going back as far as 1997, Nobelist Robert Mundell predicted that the yellow metal would return to its role in the international monetary system in the 21st century. Hanke notes that, since President Nixon abolished the gold standard in August of 1971, many have described the international monetary regime as a chaotic non-system.

Out of the various methods of implementation, Hanke sees gold-based currency boards as the most prudent choice – currency boards have been implemented by over 70 countries and have generally contributed to the fiscal discipline, price stability and growth rates in related countries.

The gold currency unit issued by this board would have to be fully backed by gold and fully convertible to gold at a fixed rate on demand, rendering it immune to manipulation. Hanke outlines a proposition that includes the creation of a Swiss-based Iranian board whose purpose is to issue coins and denominations while maintaining enough bullion to allow convertibility.

The proposed board would be unable to increase liabilities without appropriate backing by gold or foreign exchange notes the article, and it would also be independent from the financial obligations of Iran's government.

As Hanke explains, a gold-backed solution is elegant enough to be accepted by the Iranian government without appearing as a concession. Whether such a system is adopted remains to be seen, but there is little question that it would be more effective than the inconsequential reforms suggested by Hassan's government.

Thursday, October 12, 2017

Newly Released Gold Twin Maples Available Only Through Birch Gold Group

A new beacon of value.

gold canadian twin maples coin

After being named the sole distributor of the Silver Twin Maples coin in 2017, Birch Gold Group is proud to announce that it will also have sole rights to distribute the Royal Canadian Mint's (RCM) newest piece, the Pure Gold Twin Maples. Like its silver cousin, the Gold Twin Maples is the successor to a highly-acclaimed coin that has exceeded the RCM's expectations time and again.

"For decades, the Canadian Gold Maple Leaf has been considered one of the most preeminent gold bullion coins in the world. We're thrilled to be able to offer to our customers a coin to follow in this pedigree, and believe that demand will be very high," says Peter Reagan, financial market strategist with Birch Gold Group.

Investors and collectors that have come to cherish the Canadian Gold Maple Leaf for its valuable properties will find a new beacon of value in the Gold Twin Maples coin. When designing the coin, the Royal Canadian Mint sought to make its value immediately apparent. Celia Godkin, a renowned artist responsible for the appearance of several RCM coins, adorned the Gold Twin Maples with a reverse proof finish and a serrated edge that pay tribute to the coin's background while giving it a modern appearance.

The obverse features a familiar portrait of Her Royal Highness Queen Elizabeth II, while the reverse bears the mark of Canada's native sugar maple tree. A closer look at the coin will reveal two cutting-edge security features that contribute to the coin's exceptional design: a micro laser engraving of a twin maple leaf and precise radial lines.

Following in the footsteps of one of the most popular precious metals coins in circulation, the Gold Twin Maples had to serve as an example of purity and value. The 99.99% gold content of the coin will ensure that it does just that, while its dimensions will make the coin available for addition to any portfolio or collection.

With a diameter of 20 mm (0.78 inches), a weight of 1/4 ounces (7.7 grams) and a face value of CAD $10, it's clear that the Royal Canadian Mint aimed to create an all-purpose gold coin with all the flair of its predecessor. And with the option to include the coin in a precious metals IRA, no investor will want to pass up on the opportunity to acquire the Gold Twin Maples.

To learn more about this new coin, exclusive to Birch Gold Group, visit