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Gold should be part of a good mix of assets, but not as an essential and large component. At least that is the current teaching and this approach makes sense. After all, gold does not generate interest or dividends, it is primarily an insurance policy and protection against inflation. And last but not least, it needs enough supporters who believe in it. However, this also applies to our paper money system. If the uncertainty in the world becomes less, gold is no longer so necessary. One could think so. With Joe Biden as the most important president, however, factor two comes forward.
That factor two is clearly the relationship between inflation, debt and interest rates. The first two attributes will remain higher and higher tolerated, especially with Biden, while the US Federal Reserve unequivocally classifies interest rates as being low for a very long time. In other words – if you have no shares you burn your money in the so-called savings account and if you have a weakness for gold, you can still add something in weaker phases. The arguments for everything that is valuable remain. Real estate, stocks and gold are attractive and from our point of view in a ratio of 40: 55: 5. Gold is a good addition to the portfolio; those who can use the interest rate market and get loans can still allocate a good third of their assets to one or more properties and the rest belongs in an intelligent equity portfolio. Mind you, this mix only applies if you have to invest money in the higher six-digit range. If you are a beginner on a low basis, the focus is on share savings plans, first of all.
But let’s take another look at the gold price. “On the one hand, the price of gold depends on the weak dollar, and on the other hand, the low US interest rates act like an invisible ally for gold,” explains Gil Shapira, capital market expert at the broker Etoro.
The gold price has been up by more than 20 percent since the beginning of the year, although the troy ounce ended up in the red in the past three months. Numerous fundamental reasons continue to speak in favor of the gold price, but market technology can now also be viewed positively. The long distance to the rising 200-day line has fallen from more than 20 percent to around 5 percent recently, so gold is no longer overheated from a technical market point of view. The professionals made sure of that. The gold holdings of the large institutional investors have fallen sharply and are no longer at a sell-off level as at the height of the Corona crisis.
In the USA, the stimulus package is still pending, but the pressure on US policy is likely to increase with the significantly increasing number of cases there. Such an aid program costs money, and at the same time the US national debt would continue to rise massively – gold fans are happy about it. In such a situation, there is increasing demand for gold to protect against inflation, also because the US Federal Reserve and the other major central banks will not take countermeasures. “The monetary policy of the world’s most important central banks of the ECB, Fed and Bank of Japan remains expansive during the Corona crisis and is fueling concerns about monetary devaluation,” says Funda Sertkaya, managing director of the precious metals trader Ophirum. The European Central Bank (ECB) had declared at its most recent meeting that the Corona aid pact could be expanded at any time. Aid currently amounts to more than 1 billion euros.
Negative interest rates make gold investors cheer
The world’s major central banks will keep key interest rates at a low level and will try to keep yields at a moderate level by buying bonds. This is an ideal scenario for gold investors. If the yields are even in negative territory, as in this country, gold buyers even benefit because they are not affected by penalty or negative interest rates. But it doesn’t even have to come to that.
Daniel Saurenz runs the Feingold Research exchange portal with his team. It offers a daily market letter that you can test free of charge for 14 days. Sign in at [email protected] or try the stock exchange service under this one Link out. Training days and coachings can be found NEW under feingold-academy.com
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