Gold’s Soaring [3 Charts Show Why]
Gold owners rejoice. Your patience is about to be handsomely rewarded.
We have some great news to kick off the week. Gold just hit a two-month high!
It took a little longer than expected, but the fundamental drivers for higher gold prices are solidly in place.
Recent economic uncertainty caused by trade tensions, sluggish growth and ultralow or negative interest rates around the world continues to push central bankers to accumulate gold reserves at a breakneck pace.
That tells me the recent pullback in gold (and gold mining stocks), driven mainly by shortsighted speculators, is handing us a golden opportunity.
3 Reasons Why Gold Prices Will Soar
Gold’s recent weakness had everything to do with temporary dollar strength, as you can see below:
The U.S. dollar index notched new 52-week highs recently, and gold has always had a strong inverse relationship with the buck.
But I believe the dollar rally will be short-lived. As U.S. government debt and budget deficits continue to soar, they will inevitably sap the dollar’s strength in favor of gold and other hard assets.
The main reason why you should expect higher gold prices is the fact that the metal has already pulled back significantly from its 2011 high. As a result, this has triggered widespread cutbacks in exploration budgets in the gold mining sector, as you can see below:
This means global gold supply is shrinking even as demand remains steady now and is poised to surge much higher.
Lastly, if you take a closer look at the technical pattern, you can see that all we are witnessing right now is a brief retracement of the earlier gains. It’s just a pause that will refresh gold and other precious metals for higher prices ahead.
Gold has already given back about one-third of its gain since the 2018 low. The target was around $1,275 and gold is already trading back above $1,321 today, powered by more trade war worries.
Bottom Line: Buy Gold
What this tells me is that the bottom may already be in, and gold is following the likely course for a breakout, as you can see in the chart above. With gold hitting a two-month high Monday, the rally could very well be starting as we speak.
This recent pullback in gold may have been nothing to worry about because the long-term fundamental drivers for higher gold prices are still in place.
And this week patient gold speculators may finally be getting rewarded.
Consider adding some to your holdings if you haven’t already, before the rally really blasts off.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch