Precious metals have indeed experienced a lot of obstacles in recent times. The Federal Reserve is already threatening to withdraw quantitative easing (QE) and that’s bad news for precious metals for two major reasons.
First, the end of money printing, removes one of the more widely- mentioned reasons for holding precious metals. Secondly, the resulting strong US dollar tends to pummel the commodities along with the precious metals sector since they collectively by large priced in dollars.
The financial system restructured: Holding on to your insurance
As long as term traders know, there has been tipping of gold since the bull market took off in the early 2000s more than a decade ago. Gold back then was relatively cheap. But then it was not despised (as early as it is in some quarters at present) so much as it is defeated. The worst thing you could say imagine about gold is that it wasn’t even despised it was simply just absent.
But of course, it soared up through the credit bubble during the early to mid 2000s. It then peaked in late summer of 2011 at approximately $1,900 an ounce. If there is one thing you could picture out regarding gold, it’s not entirely cheap. It wasn’t necessarily immensely overvalued either, but it hardly was off the picture. It was widely accepted and loved which at present seems to be detested and loathed.
A Since then, many have seen gold as portfolio insurance instead of a value investment, having about 5-10 % of existing portfolio in them. Should everything should go horribly wrong with the global financial system in such mess, as it will still find its way back to the top eventually. That’ll be some consolidating aspects as everything else in the portfolio goes down.
Should things be in favour of the global financial system, gold will go down in value. But it shouldn’t be a bothersome problem considering that the rest of existing portfolios, Japanese stocks, cheap Eurozone stuff, UD-exposed UK blue chips and all other pertinent things which are indispensable in the business of trading will be going up at the ripe moment.
To summarise key aspects, insurance is still insurance no matter how much we try to complicate things. We seek protection in the light of insurances because we can never accurately predict the future. We shouldn’t feel very complacent about having to see even a small holding of gold, if not for the fact that the ever existing threat of a spiteful monetary surprise is always a threat.
The global financial system is a rickety old aspect and we certainly need a new version. That said being the case, while it is still en route, it’s very likely going to be very disorganised and daunting process.