A Note from James Turk: Gold Outlook

Gold has finally broken out of the multi-year base it had been forming, as can be seen on the following chart.

JTM 1

When $1,365 was hurdled, goldbugs around the world started rejoicing, having achieved what they had been wishing and waiting to happen for years. But this may be one of those times to be careful when getting what you wish for.

I believe the gold price will continue climbing higher in the weeks and months ahead. So why my note of caution?

It’s very simple. The gold price was being accumulated under $1,365 for a reason, and now the price is rising for a reason. There are consequences to be considered.

In a narrow sense these consequences or outcomes in an unpredictable future will impact our investment portfolios. Making the wrong decision at this moment in time could negatively impact our wealth.

So what are the reasons gold is rising?

There are many, and probably just as many that I cannot even think of. But I do know one thing from my five decades of following markets. Markets are a reflection of trends in price. Undervalued assets eventually move higher; overvalued assets eventually move lower.

Using various models like my Fear Index, my conclusion is that gold was undervalued for several years, which explains why it was being accumulated under $1,365 per ounce. The rising price is now signaling that more people are starting to understand that gold is still good value, particularly when compared to all the overvalued assets that exist today. So people everywhere are using their hard-earned money to buy physical metal.

Nobody can predict how the future will unfold. Nevertheless, as Mark Twain so wisely observed, the future does not repeat, but it rhymes. From time to time gold and silver rise in price as national currencies get debased. In that environment the 5,000-year history of metallic money tells us that physical gold and physical silver can provide a very welcomed safe haven to place some of our wealth.

 

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