Two Reasons for Gold’s Slow Move Up

Of gold’s many grand qualities, its role as a form of “wealth insurance” is the one I’m most interested in. Gold provides real peace of mind when it comes to protecting your wealth in uncertain or volatile markets.

And with a recent surge in buying, investors are wondering whether now’s the time to jump in.

It’s no surprise folks want to know where gold is headed these days. Take a look at what’s hitting the news daily:

  • Investor uncertainty
  • Stock market volatility
  • Worries the Fed may have hiked interest rates too far, too fast
  • Talk of a pause in quantitative tightening
  • Trade wars
  • Abandoned nuclear arms pacts
  • Dysfunctional, partisan legislature
  • Threats of impeachment
  • Global economic slowdown.

There are a lot of reasons right now for gold to surge higher. But gold isn’t surging. It’s crawling… inching its way higher.

And right now, I see two major reasons why.

A Stubborn Dollar

The U.S. dollar has been stubbornly strong.

That’s a problem for gold. These two tend to move in opposite directions… and it all comes down to investor confidence.

If people believe in the dollar and its stability, they tend not to need gold. The sentiment is greed.

Look no further than the 10-year bull market in stocks for proof.

Conversely, when confidence in the dollar is shaken, people move to gold. Fear takes over.

And since late last year, greed has been giving way to fear…

The U.S. dollar has weakened over the past 90 days. Take a look at the chart below, which compares the price of gold witth the U.S. Dollar Index. You can see the dollar backing off of a steady rise through 2018.

Gold Prices and U.S. Dollar Correlation

But the dollar is not in a free fall because we tend to measure it primarily against the world’s other major currencies. With that comparison, the dollar looks strong… because the others are all so weak.

Simply put, the U.S. dollar is the best of a weak lot. 

The Boy Who Cried Wolf

The other major reason gold is not moving faster is sentiment has not fully rallied behind it yet.

Sure, that’s kind of an obvious statement, but the reason it hasn’t rallied is the important part.

Few folks believe it will go higher because they have been fooled before.

Take a look at this chart to see what I mean…One Year Gold Price in USD

A key technical resistance point to the upside is $1,350 per ounce. Surpassing and holding above that price indicates gold has plenty of room to run higher.

Gold attempted to breach that resistance three to four times last year. And it failed to hold.

Buyers on the run-up became frustrated when it fell below $1,200 per ounce.

Confidence in gold’s ability to breach and hold $1,350 is shaken for now.

Investors will need more than $1,350 to believe. Rather, they are looking to $1,400 for confirmation of the breach of $1,350.

Until that happens, gold is just the boy who cried wolf.

Go Against the Herd

So should you wait for the price confirmation to buy up some wealth insurance?

I’m not.

Now, full disclosure, I don’t think I’ve ever been wrong.

(But if you ask my wife, you might get a different answer.)

Here’s what I’m seeing. Savvy investors (like first-time gold buyer billionaire Sam Zell) have been buying gold – their wealth insurance – at bargain prices for the past year.

And these savvy investors aren’t alone. Central banks are buying up gold at record levels. Even central banks that haven’t bought gold for what seems like forever are doing so with both hands.

Do they know something you don’t?

You can certainly wait for confirmation and buy your wealth insurance for $100 more per ounce. Or you can take advantage of the U.S. dollar’s stubborn strength, go against the sheepish herd’s mentality and pick up some wealth insurance at cheap premiums.

What to Do Right Now

If you would like more information – or have any questions – here’s what to do next…

Join me Wednesday, February 20, at 8 p.m. ET for our free quarterly webinar, On the Move with Rich Checkan and Chris BlasiRegistration will gain you access to the webinar and give you the ability to ask questions the night of the event.

You can also come see me (and Andy) if you’re attending The Oxford Club’s Investment U Conference March 27 to 30. We have been part of this conference for more than 20 years – starting with the very first one in Annapolis, Maryland.

And finally, you can simply call me at 800.831.0007 or email me using this link. 

If you are ready to buy some gold at a bargain price, I can help.

Let me help you keep what’s yours with the ultimate wealth insurance.

Sincerely,

Rich

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