Gold Has Now Entered Its Strongest Seasonal Period

(August 12, 2016 - by Chris Vermeulen)

My analysis indicates that gold will be implemented in order to protect global purchasing power and to minimize losses during our upcoming periods of ‘market shock’. It serves as a high-quality liquid asset to be used, whereas selling other assets would cause losses. In this manner Central Banks with the world’s largest long-term investment portfolios use gold to mitigate portfolio risk. Consequently, they have been net buyers of gold since 2010.

Investors should make use of gold’s lack of correlation with other assets, which makes it the best hedge against currency risk.  In May of this year, there was a huge trend change in US gold investment as the Swiss exported a record amount of gold to the United States. There has been a huge increase in gold flows into the Global Gold ETFs and Funds.  Something seriously changed last May as the Swiss exported more gold to the US within one month than they have done over the entire previous year.

Gold Has A “Clear Presence” To Play in A World Dominated by Global Economic Uncertainty

Despite the fact that we are in for a period of great financial turmoil, investors can safeguard themselves by investing wisely in gold. Do not be left behind and witness your dollar assets losing their value.

It is under these very conditions that gold is the only investment which will appreciate in value over time.  Gold will continue to perform its role as a safe haven during these times of crisis…which currently appear to be never ending. The metal surged as much as 8.1% on the day of the Brexit vote. This is unquestionably an indicator that gold’s luster of safety is undimmed under current market conditions. Moreover, there is little to be gained from arguing whether such beliefs are right or wrong. Governments around the globe have moved to a new stage of desperation by toying with the idea of "helicopter money”.  

It is my belief that since Brexit occurred, it could unleash a general exodus from the EU. Consequently, the disintegration of the European Union (EU) is now almost unavoidable.  

The list of prominent Hedge Fund Managers who are investing in gold is growing.  Paul Singer, of Elliott Management Corporation, is the latest name to lend his support. It is likely that more investment institutions will turn to gold as the logical solution to countervail the effects of many years of ‘Quantitative Easing’.

Gold has been “traded” for over 5,000 years. And for the first time, it has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates. Some regard gold as a precious metal…while I regard it as a currency!

Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners…whilst anticipating weakness in various markets. Investors view gold as a safe haven during times of turmoil. However, they tend to be late to the game as they don’t buy gold until there is truly global turmoil. In the meantime gold will have already appreciated substantially at that point.

"It’s an overt warning sign of deflation. We’ve never really had deflationary fears throughout such a widespread part of the world before," said Phil Camporeale, a Multi-Asset Specialist at JPMorgan Asset Management.

The Fed is doing everything in its power to prevent a rise in the US dollar. They are willing to orchestrate any scenario so as the stock market will continue to soar – with a view people will feel a “wealth effect” from new stock market highs, while the others are experiencing the economy contracting. The Fed is getting everything it wants in this regard. Consequently, it will continue to do so as the Fed’s number one priority is debasing the US Dollar.

As the US Dollar falls from all of the Fed’s Quantitative Easing, it will lift up gold prices to unprecedented highs.

Investors of all levels of experience are attracted to gold as a solid, tangible and long-term store of value that historically has moved independently of other asset classes.

Under current conditions gold’s importance is clearly visible during the massive rally at the start of the year, when all other asset classes were tanking. Investors piled into gold on the scare of an imminent global financial reset.

Investors should make use of gold’s lack of correlation with other assets, which makes it the best hedge against currency risk.

Does Gold Continue Its Bull Market Towards $1500?

Conclusion

The trend for ETF’s in piling into the precious metal sent the price of gold soaring by 25% in H1 - the biggest price rise since 1980. For the first time ever, investment rather than jewelry, was the largest component of gold demand for two consecutive quarters.