Gold: On the Cusp of a New Bull?
03/31/2016 9:00 am EST
One area of this market that I suspect could be on the cusp of yet a new bull market is gold, argues exchange-traded fund specialist Doug Fabian, editor of Successful ETF Investing.
For the past several months, we’ve had a buy in place according to the Fabian Gold Plan, and as such our growth portfolio has held positions in the SPDR Gold Trust (GLD) and the Market Vectors Gold Miners (GDX).
If gains such as these weren’t enough to persuade you that a new bull market is here in gold, then there are other fundamental reasons to think that the shine in the segment may continue.
First, gold is the ultimate “fear bid” asset, and despite the rebound in stocks in late February and early March, there remains a whole lot of fear out there on the global investment stage.
Second, central banks around the world are now moving more toward something called “negative interest rates,” a bizarre and hitherto academic tool that is designed to get commercial banks to start lending.
By essentially charging commercial banks to hold reserves at a central bank, global entities such as the European Central Bank and the Bank of Japan are doing whatever they can to get their respective economies going. Will it work? Well, it probably won’t work the way they hope.
However, it will have a negative influence on their respective currencies, and that means people will want to hold gold (which is both a hard currency, and priced in the more stable US dollar).
Finally, there has been a push by many central banks around the world to start to eliminate and/or reduce cash transactions.
In some areas, there’s an attempt to eliminate or reduce the number of high-denomination bills in circulation. So, what are people doing instead? They’re buying gold.
Both now trade above their respective 50- and 200-day moving averages, and both recently made new highs.
Doug Fabian will be a featured speaker at the MoneyShow in Las Vegas on May 9th-12, sharing his picks for the top ten new ETFs. Register by clicking here.
By Doug Fabian, editor of Successful ETF Investing
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