THE WEEK AHEAD IN GOLD MAR – 12, 2018

Written by Border Gold     March 19, 2018

The gold market remains on the defensive, with a weakening technical posture inviting more selling. Gold has been ebbing and flowing with overall investor sentiment, and risk appetite has remained robust, for now anyway.

Any further dips in the price of gold should, in our opinion, be viewed as a solid buying opportunity. Although numerous analysts have been ringing the alarm bell over the years for the end of the bull market in stocks, the rally’s ninth anniversary has once again fueled some strong words of caution.

Now that the Trump administration has passed its highly anticipated tax reforms, Chief Economic Advisor Gary Cohn has resigned and the November midterm elections could be gearing up for some key battles, investors should be asking what may keep the current rally on track. Unfortunately for stock market bulls, that’s a very difficult question to answer. Not only might there be little left in the tank to keep equities moving higher, but several key issues are lurking in the background, issues that could not only halt the rally in its tracks but send it crashing down.

Recent stock market volatility, a potential trade war, higher rates, accelerating inflation, overstretched valuations and other geopolitical issues are all good reasons to be focused on one thing and one thing only: Value. 

The recent correction in stocks could simply be the first wave of a major, long-term top. Markets do have a tendency to exhibit heightened volatility at major tops and bottoms, and another round of selling in the weeks ahead could be another major symptom of a market that has become exhausted. Not only that, but any significant retaliation on global trade or a more aggressive Fed also has the potential to spoil the party. One could argue that there are far more reasons for the market to go down rather than up from current levels.

The unfolding economic scenario could be considered extremely bullish for gold and other hard assets. The yellow metal may not only respond well to a more inflationary environment, but could also stand to benefit handsomely if investors begin exiting stocks in droves. And if that isn’t enough to justify higher gold prices, the dollar also remains vulnerable to a fresh and significant leg lower in value.

Taking an objective look at the big picture, gold may represent a far greater long-term value at current price levels compared to stocks. Although stocks may have some left in the tank yet before the bull market finally comes to an end, the potential risks of buying at current levels arguably do not justify the potential rewards. Savvy investors may not look to buy the bottom or sell the top, but rather look to play between the 30 and 70 yard lines. The stock market may right now be looking at first and goal from the 5.

This makes now the ideal time to consider further diversification with assets that can potentially increase significantly in value, while also possibly providing a key hedge against inflation, recession and a weaker currency.

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