December 2021 – The Next Gold Price Surge

Precious metals are a form of real cash. They are dry powder when stock, bond, and real estate prices fall. With a stash of metal, you can buy up other investments at relatively low prices and increase your wealth a lot.

Precious metals are also an inflation hedge, which has many investors scratching their heads. How do we have the highest inflation rate in 40 years while gold and silver prices continue to languish?

This is an example of market irrationality. The truth is the market is not driven by logic. It is driven by emotion, and there is plenty of market irrationality in our modern age. Look at the prices of meme stocks like Gamestop and AMC or the irrational exuberance surrounding the cryptocurrency Dogecoin. Other examples are Non-Fungible Tokens (NFT) that sell for millions of dollars.

While irrational exuberance can drive the prices of investments into the stratosphere, it can also undervalue other investments.  Today, no sector is more undervalued than precious metals. One example is the GDX Van Eck Gold Miners ETF. It’s currently at a 52-week low, and some of its cheapest prices in the last 15 years. 

The market is driven more by future expectations, and less by current events. Many investors expect the Federal Reserve to finish tapering their asset purchase program in the next few months, and then raise interest rates. What they don’t anticipate is the unexpected wild card.

The market is priced for perfection right now. As soon as another random event occurs (another variant of COVID, another geopolitical conflict, a natural disaster, etc.), the Fed will have no option but to go back to increasing asset purchases to avoid an economic meltdown. They will do this even with headline inflation running close to 7%.

And when that happens, all bets are off. Future inflation expectations will rise sharply, and with it the price of metals.

Stay the course. If you own precious metals, hang on to them. Don’t let an irrational market wash you out of your position. To keep you focused, I’ve got a special offer for you.

We had so much success with the safe investing webinar last week, that I’m going to offer it again before the year is over.

For members, at 7:30 pm EST on Friday December 17th, join me for a follow-on discussion about safe investing. We’ll talk about ways to protect your investments from the ravages of inflation and still earn a good return. If you’d like to attend, sign up on our list.

Have a great weekend, and I’ll talk to you again soon!

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