Editor’s Note: 2020 is almost upon us… And many investors are asking: “Is now the time to buy gold?”
To answer, we turned to fellow gold bug and close friend of The Oxford Club Rich Checkan.
Rich is president and COO of Asset Strategies International – a leader in precious metals, foreign currencies and rare tangible assets since 1982.
Below, Rich shares his outlook for gold in 2020 and why you should consider adding it – above all other asset classes – to your portfolio today.
I know you’ll find his advice useful.
– Rebecca Barshop, Managing Editor
Back in July, I wrote about gold’s long-anticipated breakout. Gold bugs everywhere rejoiced!
And I suggested the best was yet to come.
After being stuck in a narrow trading range from $1,250 to $1,350 per ounce for a few years, gold had cleared technical resistance at $1,350. And it confirmed the move with a breach of $1,400 immediately after.
Within a month, gold was near $1,550 per ounce!
So… what happened next?
Gold Ran Out of Gas
From that point until now, gold has pulled back to around $1,470 per ounce twice.
After the first retreat, gold got some wind in its sails and traded back above $1,500 per ounce. And it hovered around that level until the last week or so.
Now we’re testing gold’s resolve once again just below $1,460 per ounce. So it’s quite natural for gold buyers to begin to question whether they made a mistake.
Of course, they didn’t.
But dealing with money is emotional. And it’s difficult for even the most calm, cool and collected investors to keep their emotions in check when prices drop.
Stay the Course
Yet, as difficult as it may be, you must stay the course if you want to be rewarded for making a sound investment.
Let’s take a look at the last two bull markets in gold to see why…
There have been two major bull markets in gold since former President Nixon closed the “Gold Window” in August of 1971: one from 1971 to 1980, and one from 2001 to 2011.
Both lasted for roughly a decade. And from start to finish, both rewarded investors handily for their patience.
In the last bull market, that reward was 650% appreciation… or an average annual return of 65% per year!
That said, during both of the previous bull markets, investor patience was severely tested.
If you look at the chart above, you’ll see there were several gut-wrenching pullbacks. By succumbing to emotion and getting out too early, investors would have missed the majority of that appreciation.
Why the Volatility?
The volatility in today’s fledgling bull market can be easily explained.
Investors are confused. They’re searching for clues as to what will happen next in a number of situations…
- Who will win the tug-of-war between greed and fear?
- Will there be an amicable end to the trade war between the U.S. and China?
- Will geopolitical crises settle down or flare up?
- Will social unrest continue to foment or dissipate?
- What will the impact be of the love affair governments have with easy money, negative interest rates and debt?
- What will be the outcome of the political dysfunction in the world’s most powerful nation?
- What direction will American politics go after November 2020?
All of these uncertainties are weighing on investors… and therefore on the markets.
This uncertainty creates short-term noise. Yes, it’s distracting. But you need to ignore it.
Embrace the Dips
In a bull market, dips are not to be feared; they should be embraced. So consider them buying opportunities.
Depending upon your purpose for owning gold, I suggest you consider the following…
- Wealth Insurance: Buy gold on the dips. Your insurance premiums are cheap.
- Profit: Buy silver on the dips. Historically, the profit potential in a silver bull market is better than in gold.
- Traders: Sell gold at these levels (with a gold-to-silver ratio above 80), and buy silver with the proceeds. You get more ounces of silver for each ounce of gold at the start of the bull market. At the end of the bull market, you’ll want to reverse that trade.
Gold (and silver) represent a significant opportunity here and for the foreseeable future. Take advantage of the dips to “Keep What’s Yours!”
I am convinced that another bull market in gold is underway. The breakout this summer was so resolute.
So don’t panic… It’s time to pounce!
Good investing,
Rich