The Dollar’s Decline Is Fueling The Gold Bull Market
The comments below are an edited and abridged synopsis of an article by Nick Giambruno
This year could be the start of the biggest gold bull market in history, and not a typical gold bull market, either. This gold bull is riding a huge, unstoppable trend: Gold is being re-monetized.
One reason is the Fed’s reversal from tightening to pumping out more easy money. The Fed doesn’t admit there’s anything wrong with the economy. Acknowledging that it has no control over the situation is not an option. But the recent rate cuts were just that—an admission of weakness.
The gold bulls realized this, and gold soared, breaking out of its six-year trading range.
There’s another significant catalyst for gold. Central banks bought a record 651 tonnes of gold in 2018, the highest level of net purchases since 1971, when Nixon closed the gold window. And it’s a 75% increase from 2017.
Countries like Russia and China are buying gold to reduce their reliance on the US dollar and exposure to US financial sanctions.
Last year, Russia dumped $101 billions’ worth of US Treasuries, and replaced much of it with gold. The country’s reserves have quadrupled in the last decade alone. Russia is now the 5th-largest holder of gold in the world.
Russia and China have continued buying in 2019, with no sign of stopping. Other nations like Iran, Turkey and Venezuela use gold for trading, to bypass US restrictions and sanctions. All this is accelerating the trend of gold’s re-monetization.
And despite its recent spectacular performance, gold still has enormous upside. A bull market of historic proportions is on the menu, and it’s not too late to take advantage.
The possibility of a correction is always there, of course. It would be healthy for gold to level off and consolidate before going higher. After all, nothing ever goes up in a straight line.
With the Fed’s recent rate cuts and the dollar continuing to weaken, it’s hard to see gold prices correcting much more and staying low. Pullbacks are an excellent buying opportunity.