"Mad Money" Host Disagrees With Latest Rate Hike But Sees Potential in Gold

Jim Cramer believes latest rate hike was ill-advised.

Last week, the Federal Reserve met market expectations by raising the borrowing rate another 25 basis points, reported CNBC, bringing it to a total of 2.5%. Addressing the public after the hike, Fed officials hinted towards less hikes in 2019 but appeared confident in their decision to raise rates four times this year.

According to the CNBC article, even before the latest hike, many criticized the Fed for ignoring important data metrics and instead, powering through with their agenda. Just days ahead of the hike, President Trump took to Twitter to criticize the Fed's policy amid a possible slowdown of the U.S. economy.

In Thursday's episode of "Mad Money", CNBC host Jim Cramer underlined why this month's hike was ill-advised, especially in the context of additional rate hikes in 2019. Additionally, he pointed out that the central bank's hawkish tone can only persist through willful oversight of important data.

This includes a projection for slower GDP growth in 2019 and the looming threat of maxed-out employment. According to the article, some have also felt as if the Fed is turning a blind eye to the recent stock crashes and what they might mean for the economy going forward.

To Cramer, the last point is especially poignant as stock investors have been placed on thin ice by the Fed's hawkish rhetoric. The host shared his view that equity investment right now hinges on the chance that Fed Chair Jerome Powell becomes more recipient towards red flags and simmers down on tightening.

Despite the concerning implications of future rate hikes, Cramer reminded viewers that there is always a profitable market out there. After four rate hikes in 2018 and promises of several more next year, Cramer sees little alternative to gold investment as the best possible bet.

The analyst said we will see a bull market in gold as the true state of the economy becomes apparent, reports CNBC. In particular, Cramer pointed to several sliding stocks as proof that the economy is slowing down faster than Fed officials would like to admit.

While rate hikes are considered bad for gold, the markets usually price in future hikes months before they happen, alleviating any downside to the metal. With so many cautioning against the consequences of successive rate hikes in a slowing economy, what is usually seen as a headwind could act as the catalyst for the next bull run in gold, stated the article. Cramer certainly seems to think so, as the host compared his feelings of distress post-hike to the tense atmosphere of 2007, right before the global financial crisis hit.

Precious Metals Analysts Bernard Dahdah Sees Gold Shining in 2019

Natixis sees imminent economic growth slowdown and accompanying upturn in gold.

As gold investors try to guess what 2019 could bring, one French bank is bullish on the metal's prospects next year amid a change of economic climate in the U.S. Talking to Kitco, Natixis' precious metal analysts Bernard Dahdah said his bank sees an imminent economic growth slowdown and an accompanying upturn in gold prices.

The average domestic investor has had little difficulty maintaining optimism this year. The Federal Reserve proceeded with its hawkish agenda, backed by positive economic data reports and a high-riding dollar. President Trump's historic tax cuts also extended his campaign promise of a reinvigorated U.S. economy. But according to the Kitco article, several flash crashes in the U.S. stock market, most recently in October, affirmed to investors that trouble might be brewing.

Dahdah points out that market participants were quick to rejoice over tax cuts while ignoring the more significant issue of budget deficit. Whereas the cuts were only intended to serve as a short-term stimulant, the article writes that the $985 trillion of projected deficit for 2019 is a long-lasting issue without an easy solution.

Dahdah expects the U.S. deficit to become more prominent next year and force government officials to take a step back. The fading of the stimulus effect will place further pressure on stocks, likely leading to more corrections. Meanwhile, the Fed will wrap up its tightening cycle after years of successive hikes.

According to the article, this environment of stagnant growth and tumbling stock valuations will play directly into gold's hand as investors rush to move away from riskier assets. The weakening of the dollar, expedited by the change in Fed's policy, will remove additional pressure from the yellow metal. Dahdah said that the dollar index will face more hurdles as central banks around the world commence their own tightening.

The return of uncertainty will quickly bolster gold prices, and Dahdah sees the metal averaging $1,275 an ounce in 2019. However, the analyst noted that gold has plenty of catalysts waiting in the wings, and that the metal could shoot up to $1,350 an ounce next year.

Natixis also sees great things in store for silver after a middling year. According to the article, the bank predicts silver will catch up to gold due to renewed interest in commodities, thereby closing the gap in the highest gold-silver ratio since 1993. Dahdah said that investor demand will push silver to an average of $16 an ounce in 2019 with the possibility of a climb to $18 an ounce.

Amid Global Economic Concerns, World Returns to Gold

Dr. Makhdoomi states when people loose faith in a government, the solution is precious metals.

Despite the outwards appearance of stability, the global economy runs on an inflationary system that confines it to an endless cycle of crashes and reboots. And, according to Greater Kashmir's Dr. Makhdoomi, the world's economic woes can be traced to the abandonment of the gold standard, albeit much earlier than the Nixon Shock in 1971.

Two and a half millennia ago, the government of Athens used a sound economic system with a set currency value based on physical gold writes Greater Kashmir. Yet wartime expenses drove the government to inflate its bullion reserves by minting coins of a lesser purity. With the addition of copper, 1,000 gold coins became 2,000 and the government had enough leeway to fund its ventures, even at the cost of currency stability.

As simple as it might seem, the very same method of funds creation is used today by governments around the world at a much larger scale. As Makhdoomi explains, any spending done by a modern government is done in the red, as no sovereign country operates without a budget deficit. When a central bank needs more money, the solution is to simply print new currency and worry about the inflationary consequences later. According to the article, the problem is exacerbated by the issuing of government bonds, which create more money out of thin air.

Makhdoomi points out that, when given enough false assurances, the people can and will lose faith in a government. When they do, he says the solution is always to rush back to precious metals as a way of preventing wealth erosion amid increasingly questionable central banking practices.

Consumers have come to equate money with currency, even though the latter has no intrinsic value and is merely a government's promise. According to the article, the price movement of gold in dollar terms is a perfect example of this, as an ounce of metal went from $40 in 1971, when President Nixon moved away from the gold standard, to over $1,200 today. The jump in value illustrates how much money has been printed since then in a baseless free-floating currency system.

Makhdoomi, however, believes today's gold prices might still be far lower than they should. Some pundits, such as monetary historian Mike Maloney, believe that an economic crash is closer than most think. When things go awry, Maloney expects gold and other precious metals to come under revaluation with a rapid price jump to $5,000 an ounce.

Both Makhdoomi and Maloney agree that the next major crash will be accompanied by a wealth transfer. Depending on whether one invested in gold or kept their faith in currencies, this could either translate to massive profits or a risk of losing everything.

Analysts Say Gold Poised to End Year on a High Note

Gold expected to do well in the last few months of the year with more upside potential in 2019. 

Having gained 3.5% over the previous week, gold seems poised to end the year on a high note after two mild quarters says CNBC. The CNBC article writes that different analysts expect the metal to do well in the last few months of the year before moving on to post a strong performance in 2019.

Jim Steel, chief precious metals analyst at HSBC, attributes gold's performance this year to an overbearing dollar which, along with higher-yielding Treasury notes, diverted some safe-haven demand away from the yellow metal. According to CNBC, Steel said gold was severely oversold below the $1,200 level, as it recently had the largest amount of shorts since 2001. He explained that dips such as these are bound to attract bullion investors, especially those in Asia.

Steel noted that bearish sentiment among speculators created an excessive short position that could ultimately act as strong support if sellers end up having to cover their bets due to higher prices.

Although a pick-up in physical demand in emerging markets played an important role in the price spike, Steel thinks the concerning equity picture is what really placed gold back into the spotlight reports the article. The S&P 500 index notched major daily losses in back-to-back weeks as investors grew increasingly worried over tensions between the U.S. and China, shaky emerging markets and economic issues brewing in the eurozone.

According to CNBC, the Fed's assurance that rate hikes would continue into the new year was another source of concern, with some feeling that the central bank is too eager to tighten. But Bart Melek, head of commodities strategy at TD Securities, believes the Fed might not follow through with its intent to raise the funds rate above 3% by the end of 2019. In particular, he says the Fed could be dissuaded from tightening by additional flare-ups in the stock market.

Melek noted that a drop in the 10-year yield from above 3.25% to 3.15% also helped gold take back safe haven demand. A loss of faith in the dollar's long-term picture could further strengthen gold's case in the near future.

The strategist sees gold holding onto its gains as the year comes to a close, expecting an average of $1,225 for this quarter. From there, Melek thinks the metal will average $1,325 an ounce by the fourth quarter of 2019.

HSBC predicts that the metal will average $1,274 an ounce this year with plenty of upside potential in 2019. Steel pointed to record volatility that the markets suffered from earlier in the year, which brought the metal to $1,360 an ounce. According to CNBC, he expects the markets to slip back into turbulence again, cementing gold's long-term position and giving way to ample short covering among speculators.

Barron's Sees Gold Staging a Comeback in the Near-Term

Despite lack of enthusiasm from large speculators, gold remains as popular as ever.

In a recent article on Barron's, columnist Andrew Bary outlined why gold could be staging a comeback in the near-term. Newsmax reported on the article and wrote that, despite the lack of enthusiasm from large speculators, gold remains as popular as ever among cautious investors and those looking to shield themselves against the dollar's depreciation.

Although it isn't making the headlines, Bary notes that global inflation is something every investor should prepare for. As GoodHaven portfolio manager Keith Trauner explains, governments around the world are dealing with an immense amount of sovereign debt. According to the Newsmax article, policy makers will always see inflation as preferable to defaults or restructuring, which is why a steady uptick in prices will continue to be the norm. Few assets can boast of having retained their value against the dollar over the past century, which makes gold the ideal hedge against a guarantee of high inflation.

Potential losses in the dollar are another source of relief for the yellow metal reports the article. Those who feel that the greenback is propped up and overbought rely on gold's strong negative correlation with it to guard against a potential pullback.

According to the article, the general consensus is that higher interest rates will continue pushing down on gold, with the federal-funds rate expected to rise by 1% between now and late-2019. Yet many forget that the inflationary 1970s, which hosted a record number of rate hikes, still rank among gold's best decades, showing that the metal can thrive in an environment of higher rates.

Gold's unyielding scarcity likewise speaks in favor of a recovery. The roughly six billion ounces of gold available today, worth at least $7 trillion, are minimally replenished year-on-year, as the total annual mining output amounts to less than 2% of the global supply. Mining efforts have been complicated by the cost-cutting closures of many mines over the past decade and a dearth of new exploration, giving weight to warnings that the supply of gold is rapidly dwindling, writes Newsmax.

Large investors with a keen eye for precious metals aren't waiting for gold prices to surge, as evidenced by John Paulson's recently-formed coalition whose goal is to breathe new life into the gold industry. Besides the billionaire fund manager himself, other prominent members of the 16-member group, called Shareholders' Gold Council, include fellow money manager John Hathaway and Egyptian billionaire Naguib Sawiris. Sawiris, who makes the list with his La Mancha Group, said in April that he invested half of his $5.7 billion net worth into gold.

Paulson's decision to unite institutional gold investors comes as large funds continue to shun gold in a gesture that many interpret as a sign of higher prices to come.

Analysts Say Win-Win Situation is Forming for Gold

Despite the dollar's recent gains, ScotiaMocatta sees gold recapturing its haven appeal.

In the latest edition of ScotiaMocatta's monthly Metal Matters report, the bank's analysts examined gold's prospects amid various geopolitical escalations. After falling for much of 2017, the U.S. dollar managed to rebound in December and has since attracted the attention of safe haven-oriented investors.

According to a recent article on Kitco, ScotiaMocatta sees gold eventually winning against the greenback and recapturing its haven appeal. A notable part of gold's tepid summer was a lack of response to risk factors that would otherwise warrant a price boost. But now, with a clear bottom forming on the chart, the analysts are certain that gold will receive its long-overdue benefits from the myriad of risks on the horizon.

Among them is a well-publicized tariff battle between the U.S. and two of its main trading partners in China and Canada reports Kitco. The Asian nation has seen over $200 billion of its exports to the U.S. incur higher levies and has pledged to retaliate in kind. Meanwhile, Canada finds itself facing a possible exclusion from the trillion dollar-worth Nafta agreement, which would greatly complicate trade with its U.S. and Mexican neighbors.

Iran has also been a source of concern, as the country saw its economy placed into question by sanctions imposed by the U.S. over nuclear disagreements. The situation will likely worsen towards the end of the year says Kitco, when further sanctions are scheduled to take place.

ScotiaMocatta also expects flare-ups in emerging markets to make an impact on gold's price, noting that the strength of the dollar has highlighted the weakness in various emerging economies. According to the article, the recent economic upheaval in Turkey has taken center stage, with the country experiencing a hyperinflation scenario similar to that of Venezuela. The presence of several European banks in Turkey raised concerns that the crisis could spread across the entire eurozone as well as complicate the region's handling of migrants. The analysts listed Argentina, South Africa, Russia, Brazil and Italy as other potential sources of risk, whether due to issues with their respective governments or those stemming from U.S. interference.

To ScotiaMocatta, this is a win-win situation for gold, as renewed safe-haven demand will be further strengthened by lower price levels. Likewise, emerging market crises could make the world's leading central banks, including the Federal Reserve, hesitate to continue applying their tightening policy writes the article.

The bank listed $1,241 an ounce as a key level to watch out for in the gold market. According to the analysts, a holdout above this threshold, coupled with any sign of weakness in the dollar, could trigger an aggressive price rebound in the metal as funds rush to cover their positions.

Multiple Analysts See Gold Rebounding in the Long Run

The general consensus is gold is in a position to retrace, it's just a matter of how far.

As gold approaches the finishing line for a lukewarm quarter, a recent Kitco article reveals multiple analysts see the metal rebounding as we move closer to December. In an interview with Kitco, ICBC Standard Bank commodities strategist Marcus Garvey stressed that gold's lack of performance this summer is merely the result of an outperforming dollar.

However, the greenback could be testing the limits of its rally in the near term says ABN Amro precious metals and diamond analyst Georgette Boele. In the article, Boele adds that her bank expects a moderate recovery in the Chinese yuan, which should further support gold through year-end.

Analysts also took note of the record net short positions amid gold traders, interpreting them as a sign that a rebound is close. In the article, Garvey pointed out that lower prices have an upside as they open up new windows for physical demand, especially in India. To him, this is a familiar set-up for a short-term rally, one that could be triggered by minute news of slower U.S. growth or improved U.S.-China relations.

The general consensus appears to be that gold is in a position to retrace, with various opinions as to how far. According to the article, FXTM research analyst Lukman Otunuga and TD Securities commodity strategist Ryan McKay both view $1,200 as a very important psychological level, adding that it would be a bullish sign if prices manage to hold above it. On the downside, the two analysts see $1,160 an ounce as the worst-case scenario. Kitco's senior technical analyst Jim Wyckoff feels that bearish sentiment in the gold market could be nearing exhaustion, and that prices should steadily move up beginning next week.

Predictions for the six-month period are more positive, as analysts agree that the metal could be bottoming out soon reports the article. ABN Amro sees the metal reaching $1,250 by December before climbing to $1,400 by the end of next year. Gold's recovery will move across the $1,200 range and potentially reach $1,300 an ounce within six months, said Garvey, who also dismissed the view of the dollar as a safe-haven competitor.

TD Securities said that a slowdown in the greenback's rally and a wrap-up of the U.S. hiking cycle will help gold prices rise back to $1,250-$1,275 before the end of the year. Capital Economics shared their bullish long-term outlook for the metal, stating that gold should thrive over the coming years due to a number of favorable factors.

These will include a fading fiscal stimulus and the possibility that the Fed will have to lower interest rates once again. Capital Economics commodities economist Simona Gambarini said that U.S. GDP growth will slow to 2.0% in 2019 and 1.3% in 2020, reintroducing the weakness in the dollar seen throughout 2017. Gambarini said that her firm sees gold reaching $1,350 an ounce by end-2019 and $1,400 by end-2020, adding that the metal will outperform the euro as it moves back up.

China May Secretly be Adding Gold to its Reserves

Officially, Chinese bullion reserves sit at 1,843 tons of gold. However, their hoard could be much larger than the numbers released.

If history is any indicator, we could be nearing an announcement that the People's Bank of China (PBOC) expanded its gold holdings substantially, reports Newsmax. Officially, Chinese bullion reserves sit at 59.24 million ounces, or 1,843 tons of gold. The figure has remained unchanged since October 2016, shortly before Donald Trump was elected President.

However, according to the article there are signs that suggest China has quietly been adding to its reserves over the past two years. This means, they could be boasting a gold hoard much larger than the numbers given to the public. Before mid-2015, irregular updates by the PBOC weren't considered unusual as the country had only updated its official figures once between 2009 and 2015. Then suddenly, the PBOC revealed a 57% increase in bullion holdings over a period of six years.

The shift towards monthly updates since July 2015 coincided with stricter International Monetary Fund regulations, as China wanted to have the yuan included in the Special Drawing Rights basket. The updates ceased almost immediately after the yuan became part of the SDR in October 2016.

Analysts have little doubt that China's gold holdings have indeed grown since the last update states the article. In fact, Philip Klapwijk, managing director of Precious Metals Insights Ltd., views bullion acquisition by the PBOC as a strategic imperative.

Klapwijk referred to heightened trade tensions between the U.S. and China as the biggest reason why the latter would want to have as much bullion as possible. According to the article, the threat of escalation puts into question the future of China's massive export figures, and bolstering the central bank's bullion reserves would give the government more freedom amid economic constraints.

Klapwijk also pointed out that China's government has plenty of room to amass bullion even in the absence of international purchases. The people of China consistently rank among the top buyers of gold jewelry in the world, in large part because the average citizen is inclined to treat gold ornaments as an investment. If needed, the article writes that the PBOC could access the people's jewelry holdings to obtain a significant amount of bullion. Furthermore, as the world's largest gold miner, China retains the option to simply purchase its own ore rather than export it.

Mark O'Byrne, research director of precious metals broker GoldCore Ltd., is certain that China has already increased its gold holdings by a wide margin over the past two years. To O'Byrne, it's only a question of how large the figure will be when the update is finally revealed.

Expectations that China may have quietly added to its gold hoard over the past two years fit into a general view held by many market participants that China's bullion reserves are actually far greater than reported. Given the nation's propensity towards gold, both on a state- and consumer-level, some have speculated that China's true bullion holdings could be twice as large as the officially reported 1,843 tons.

Incrementum AG Fund Manager Says Now is the Time to Buy Gold

Gold market has reached its lows for the year, with prices to gain traction as investors lose optimism.

According to one notable strategist, the gold market will soon see a strong shift in momentum and an accompanying spike in prices. A recent article on Kitco features Ronald-Peter Stoeferle, fund manager at Incrementum AG, and why he believes gold is headed towards an uptrend in the near term.

In the article, Stoeferle says that the gold market has already reached its lows for the year, and that prices will begin to gain traction as investors lose some of their optimism. Stoeferle added that gold's current levels make right now a good time to load up on bullion.

The money manager listed several favorable developments that will keep gold ahead in the coming months. According to the article, signs show that the recovery in the dollar is already losing steam and that investors are being less confident regarding the greenback's future. Stoeferle said that the dollar is bound to go down as the Federal Reserve rounds up its tightening cycle.

As investors come to realize that the Fed doesn't have a lot of hiking room left, the article states the dollar's rally will begin to fade. Stoeferle said that the downturn in the dollar has been a long time coming, noting that many investors were shorting the currency at the start of the year.

The fall in the dollar will coincide with another round of trade tensions and the ensuing market stress reports the article. He sees the potential threat of a trade war as a big statement in gold's favor, as the fallout could act as a major booster for the gold market. Stoeferle said that the growing global uncertainty could force the Fed to return to a looser monetary policy, which would further support the metal.

Stoeferle feels that his forecast for the dollar goes in line with key U.S. officials who have stated that a weaker dollar would be positive for trade. Even President Trump has, on several occasions, likewise called for a lower dollar in order to strengthen U.S. trade.

Although the booming stock market has been gold's greatest nemesis, the article writes that equities will end up bolstering the metal's price. Like numerous analysts, Stoeferle thinks that the record-setting equities are finally winding down. He views the trouble in emerging markets as an omen and a sign that the rest of the stock market will soon follow. The weak technical picture in the stock market is another point that gold will draw strength from.

To Stoeferle, the metal's tenacity in difficult times is the surest indicator of its ceaseless value. Even when other assets posted historic runs, gold remained competitive and avoided selloffs while waiting to make its move up.

ING Analysts See Gold Hitting $1,400 This Time Next Year

ING's team believes gold stands to gain more from uncertainties than it has in recent months.

According to a recent report by ING, gold will eventually break past its current levels and make a run above $1,400 an ounce. Kitco reported that the metal has enjoyed numerous positive geopolitical and macroeconomic developments, which included the U.S.-North Korea conflict, trade tensions between the U.S. and various countries and several flare-ups within the eurozone.

ING's team believes that the metal stands to gain much more from these uncertainties than it has in recent months. Besides current tailwinds, ING's commodities strategist Oliver Nugent said that the metal will be assisted by several new catalysts.

One of the primary drivers of the breakout, said Nugent, could be a willingness by the Federal Reserve to allow inflation to run past the targeted rate of 2%. The article writes that inflation only recently moved towards the long-coveted 2% after trending downwards for a prolonged period of time. Some analysts warned that the sudden reversal could mean an explosion of the inflation rate past what the Fed could manage.

These concerns could prove valid as inflation continues to run upwards, having most recently clocked in at 2.5%. Should the Fed allow inflation to run its course, whether by choice or necessity, gold would find itself among the primary beneficiaries reports Kitco.

A shift in inflation expectations would also help move gold towards ING's forecasted price. While expectations have been subdued in recent months, Kitco writes the steady uptrend in inflation could eventually affect sentiment and tell market participants that it's time to brace for significantly higher prices.

Although there is little question that lower bond yields play in gold's favor, Nugent thinks that the drop in Treasuries was another booster overlooked by the gold market. Nonetheless, the ongoing loss in yields should prove to be a major factor in gold's rise predicts Kitco.

"Since its peak two weeks ago (May 16th) US treasury yields have fallen hard, boosting gold's appeal as a non-yielding asset and supporting a brief break above $1300/oz. The ten year has dropped from a high above 3.1% to a low of 2.78%, before recovering slightly but still remains below the psychological 3%," said Nugent.

The analyst believes that geopolitical tensions could come to a head as the G7 summit draws to a close, with many of the attending countries being at odds with one another over trade issues. Strong physical fundamentals will also support gold, said Nugent, with recent Swiss export statistics featuring a prominent upgrade. The country recorded a 2% increase in bullion exports for the first four months of 2018, an increase driven largely by Chinese demand.

Ultimately, ING believes gold's long-term trajectory is set in stone, as the bank expects the metal to average $1,400 an ounce by the second quarter of 2019.

Gold to Emerge as an Important Asset for Current Times

Despite a tame month, gold is set to remain a key part of any portfolio.

Although multiple factors converged to push gold prices lower in April, an article on Financial Express says the metal could still emerge as the year's marquee asset due to the state of the global economy.

Besides temporary relief from geopolitical tensions and a rise in bond yields, a stronger U.S. dollar was also a major contributor to a tame month for gold. After a prolonged decline that raised eyebrows with both domestic and foreign investors, the dollar index finally caught some respite and reversed its trajectory. According to the article, the greenback now sits at multi-week highs, a position largely influenced by the Federal reserve's hawkish stance.

Having left interest rates unchanged during their latest meeting, the Fed nonetheless affirmed their previous forecast for a total of three rate hikes in 2018. Officials also expressed their desire to continue with the monetary tightening for the foreseeable future should current economic conditions persist. And while successive rate hikes are generally seen as negative for gold, there are ways that the metal could reap the benefits from this aggressive policy says the article.

To some, the Fed's current course is analogue to taking away the proverbial punch bowl. Given the loose monetary policy of the last decade, a sudden shift to a more austere approach could shock the laid-back markets. Among the worst to suffer this effect could be the long-soaring stock market states the article, which recently begun to show cracks after seeming invulnerable. The Fed's goal of reducing their balance sheet by $420 billion this year and $600 billion the next could slowly introduce discord into equities. Despite tax cuts and other encouraging developments, 2018 could see investors' optimism dwindle as they wake up to the reality of a lesser money supply.

Inflation expectations could act as another source of gold's strength. The Fed is confident that it can maintain the targeted inflation rate of 2%, and much of their current agenda rests upon it. But many are quick to forget that inflation was moving in the opposite direction for some time, raising concerns that the reversal was achieved too quick. Given that the ideal 2% have already been surpassed, the Fed could find itself struggling to deal with soaring inflation. In this environment, the article says gold would quickly become a most-desired commodity.

The economic tug of war between the U.S. and China will also continue to remind investors that gold is a key part of any portfolio. Despite the seeming calmness in recent weeks, the situation is only beginning to develop, and the leaders of both countries are unlikely to back down. Global growth, industrial metals and energy will all come under attack should the threat of a trade war return.

The article states that this would harm bond yields as investors shun U.S. debt, and the rapid expansion of the latter has already placed the dollar's long-term purchasing power into question.

Regardless of short-term happenings, the ongoing lack of equilibrium in the global economy along with constant geopolitical flare-ups are sure to preserve gold's favor among risk-averse investors.

ETF Manager Says Believes it's Time to Move into Gold

Fritz Folts says the risk-happy investment landscape in recent years is quickly shifting to one that favors safer assets like gold.

According to a recent article on Bloomberg, a veteran fund manager with over three decades of experience has lost his appetite for ETFs and is moving into gold. Fritz Folts currently acts as chief investment strategist and managing partner at 3EDGE Asset Management, where he oversees $800 million in assets. The firm started in January 2016 with $100 million under management, and has since averaged an annual return of 9.03% in its portfolio.

During their early days, the firm focused heavily on emerging-market ETFs and country-specific funds and made several profitable bets along the way. But the article reports Folts no longer sees this strategy as prudent and has slashed his positions in stock-backed funds while eliminating his exposure to emerging-market ETFs.

Folts' reasoning is straightforward – he says that the risk-happy investment landscape in recent years is quickly shifting to one that favors measured bets and safer assets. In fact, 2017 is an example of how growth momentum and optimism from investors can combine to propel a market sky-high, as equities kept reaching new peaks throughout the year.

In 2018, the senior money manager sees growth diminishing across the board and investors becoming wary of over-exposure to risk. The article states the latter has become that much more apparent by this year's sharp tumbles in the stock market, which were concerning enough to elicit a response from the White House.

In a phone interview with Bloomberg, Folts shared his view that gold is becoming the asset to own in this new environment. To him, the metal is the best way to absorb external shocks and combat the rise in volatility. Gold has gained 1% over the past month, aided by geopolitical tensions and the possibility of a trade war between the U.S. and various other top economies.

What started as an increase in tariffs on metal imports by President Trump escalated into a back-and-forth between the U.S. and China, sparking concerns that the global market could suffer as a result, reports the article. The European Union likewise responded negatively to Trump's restrictions, threatening to retaliate in kind should the policy continue. These events placed further pressure on the stock market, which was already showing its first cracks, and reignited interest in precious metals.

Folts is also bearish on debt and expects rising rates to continue pushing bonds down. Absent a particularly strong corporate earnings report or an abrupt change in the Fed's rhetoric, he sees little reason to place faith in stocks and speculative ETFs, especially given gold's strong performance as of late.

"We will definitely have more volatility this year," he added. "And gold can help us there."

International Bullion Firm Claims Gold a Good Insurance Policy

Analysts say prospects of higher rates does little to take away from the metal's appeal.

Last week the Federal Reserve met expectations by hiking interest rates for the first time in 2018. While gold's price trended lower in the aftermath of the hike, Kitco reports that one international bullion firm believes the prospect of higher rates does little to take away from the metal's appeal.

In their latest report, analysts at Degussa said that investors should view price dips as an entry point given the various factors that make gold investment a prudent strategy. Besides general protection against fiat currency manipulation, the firm pointed to the possibility of rate hikes leading to a recession as a particularly poignant reason to consider gold in one's portfolio.

Using the same analogy that multiple other analysts have turned to, Degussa explained how the Fed's hikes could ultimately have a major adverse effect.

"The Fed's tightening policy is like taking away the 'punch bowl,' and if it raises interest rates too much, the party would definitely come to an end. It is against this backdrop that gold, even in times of slightly higher real interest rates, is increasingly attracting investors, which has ultimately led to a price increase," said the report.

Although gold is mostly seen as an asset, the analysts noted that the view of the precious metal as global currency is gaining traction, namely because of inflationary pressures that erode faith in fiat money. Gold is frequently pitted against the dollar and soars in times of a weaker greenback, but Degussa's team noted that the metal continues to outperform a basket of global currencies.

"The price of gold should, over the long run, compensate its owner for the loss in the purchasing power of fiat currencies," the firm said.

The markets were near-unanimous regarding the likelihood of the latest hike, but there is plenty of doubt in regards to the Fed's future course of action. The Kitco article writes that while some believe the Fed could hike rates up to four times this year, especially given the hawkish tone of new chair Jerome Powell, others cast doubt on their ability to raise borrowing costs further.

According to Kitco, another factor that could play in gold's favor is a potential shift in the Fed's rhetoric. The central bank bases its current strategy on forecasts of a stronger economy and a lower unemployment rate, with hopes that inflation will reverse its backwards trend and meet the targeted rate. Despite their optimism, some market participants believe that the Fed will alter its prognosis in one or more areas, which would give rise to higher gold prices and serve as an additional deterrent from successive rate hikes.

Managing Director at Crossborder Capital Calls Gold Best Safe Asset

A wealth management firm says short-term dips in gold prices are a buying opportunity as gold is bound to go higher over the longer term.

According to one wealth management firm in a recent Kitco article, short-term dips in gold prices represent a buying opportunity as the metal is bound to go higher over the longer term.

Talking to Kitco, Michael Howell, managing director at Crossborder Capital, said that the prices of safe assets are wrong, especially Treasuries. Although his firm expects bond yields to rise to 3.5% by year's end, higher Treasuries could uncharacteristically support gold prices because of the mechanism driving yields up.

He notes the optimistic tone of Fed Chair Jerome Powell in his recent speech suggested further tightening of the monetary policy and potentially four rate hikes this year. While this is generally seen as negative for gold, Howell says the metal will instead benefit from exaggerated bond valuations.

Howell explained that, with the supply of Treasuries increasingly outstripping demand, their gains have to be inflated to attract investors. This has brought on overpriced bonds, a situation that will worsen should the Fed roll in another year of successive rate hikes.

"The appetite for government debt is dropping off pretty fast, so you have to have higher yields to make it more attractive," said Howell regarding the worrying fundamental picture of Treasuries. "We see a repricing of safe assets and gold remains the best, cheapest asset."

The article also reports on the dollar, which, despite its prolonged plunge, one that recently saw the currency test multi-year lows, Howell believes that the greenback remains overvalued. Because of this, Howell's firm sees further losses in the dollar as a certainty. This prediction is especially bullish for gold, as the metal has a strong inverse correlation with the reserve currency and soars in times of a weaker dollar.

Howell believes the source of the dollar's weakness comes from a loss of influence in the global market. Examples of this include the Chinese yuan, which is already competing with the U.S. dollar for a prominent spot as a transaction currency in Asia. The growth of the euro as a funding currency acts as yet another threat to the dollar's status with foreign investors reports the article.

With expectations of a reversal in bond yields and more bearishness in the dollar, Crossborder Capital says that the entire financial background is positive for gold. The firm has been advising investors to stock up on the metal during weaker periods because it will go higher in 18 months.

"Strategically, we think we are at a tipping point. It's just a question of how quickly things shift," said Howell.

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.

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.

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.

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.

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.