As central bankers and governments around the globe continue to debase currency through fiscal and monetary stimulus, gold will remain a natural hedge.
Consider gold declined 15% from the August peak to the November low. A healthy correction within the secular bull market. But support above $1700 is strong and the downside seems over-extended, at least in the foreseeable future. Demand for gold is poised to stay strong as a hedge against U.S. dollar weakness.
One of most relevant macro-economic events in 2020 was the combination of the breakdown of the U.S. dollar and strength fueling copper (and resources).
Price action in both asset classes suggest inflationary pressures could rise in 2021. Some of those reasons could be U.S. dollar weakness and a brewing global economic recovery from the lockdowns in March 2020.
This allows growing demand in both precious metals and resources. An occurrence that historically has been specifically bullish for silver.
Keep in mind, silver is a precious metal that moves with gold during financial uncertainty acting as a hedge against currency debasement, among other things. Silver is also a highly used industrial metal with growing demand from a recovering global economy, making it an ideal asset in your portfolio.
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In 2020, silver’s rise broke above key resistance near $20 confirming its own secular bull market. Silver has pulled back from the highs and it’s showing strong support above the previous resistance at $20.
Consider increasing exposure within your portfolio. It will allow you to counter loss of purchase power in any cash position and will also allow you to ride the global economic recovery rally. I also have exposure through silver miners such Hecla Mining (HL), Silvercorp Metals (SVM), among others.
Meanwhile, my conservative recommendation in last year's Top Picks report was keeping cash positions diversified in British Pound Sterling which appreciated 4% while the U.S. dollar lost 7% in the same time frame, allowing savings in purchasing power equal to 11% in the currency exchange for our cash position.
I continue to own pound sterling as part of my cash holdings and included midway 2020 the Australian dollar to diversify further away from U.S. dollar weakness.