by Judy Baker, Argo Gold
At a tumultuous time in the world I am going to put considerations forward with respect to where gold bullion is going in 2017.
The theme of Negative Real Rates being echoed from economists seemed to be the catalyst that shook investor confidence in paper currencies of the biggest economies of the world and resulted in material investment in gold bullion and gold stocks. The rate of inflation was higher than the interest rate on an investment. The rapid price increase of gold bullion and gold equities was fuelled by short covering.
The spectacular rise in gold bullion and gold stocks resulted in many investors across the board feeling like they had missed the initial move in the gold bull market. In my opinion, though investment diversification into gold was now on everyone’s radar screen and investors were looking for pullbacks or a correction to get a position and will continue to do so.
In 2016 the world is in a tumultuous time with the unexpected outcomes of Great Britain voting in favour of Brexit and a Trump presidency in the United States. The US economy and equity markets have been a bright spot on the world economic map which has been in a state of malaise. The forthcoming Trump presidency is signalling a full on economic agenda for the United States and has brought optimism for a further boom in the US economy.
The US equity markets are on wheels. The US bond market is getting crushed. Most economists believed a US rate increase was already baked into the cake prior to the election but it is a very highly likely scenario now. Thus, interest rates are going up and the unknown is at what rate relative to inflation. Will negative real rates remain in place?