May Never Get Another Opportunity to Buy Gold at this Level Again
The mammoth US debt stands at $19.8 trillion and it will increase under the new president, considering Trump’s lenient tax cuts and plans for infrastructure spending.
This will stoke inflation and, as a result, the safe havens are being dumped, while risky assets are on the rise.
The markets are currently discounting only the positives and are not addressing the related negatives that will tag along. Without knowing the finer details of the proposed policies, the markets have gotten ahead of themselves.
Interest rates are not likely to increase in January; the Fed is likely to postpone its rate hike to March 2017, wanting to know more about the policies of the new president before hiking rates, leading to a falling dollar.
Gold has always been touted as a hedge against inflation. If Trump’s policies increase inflation, gold is a winner. If he implements trade protectionist policies, it is likely to lead to global economic and geopolitical turmoil, which will be even better for gold buyers. Whichever way you look at it, gold will benefit its buyers.
The current fall in gold is retesting the strong support area of $1,200. It could break under this, but the break is likely to be short lived.
The RSI has formed a positive divergence: While price of gold has fallen, the RSI has held above the lows, which is a positive sign, and a sign of a bottom. Markets usually take off when positive divergences form at the bottom.
Speculators had accumulated short-term positions in gold, expecting a Brexit-type rally if Trump was elected. However, that didn’t happen, and they hurried to close their positions, which has exacerbated the fall.
Once these positions are cleared, the stronger hands are likely to step up their purchases because gold is on sale. Expect these prices to be the lowest in our lifetimes. Hence, be ready to buy gold in large quantities for the long term.