1. High asset inflation - Don't believe the 'cost-of-living' inflation numbers put out by governments because 'assets' are commodities as well. The reality is that the high price of assets makes gold attractive. i.e. The risk of weaker asset values, or more likely rally-bust-rally.
2. Low interest rates make gold more attractive because there is no return on debasing monetary units.
3. Emerging market risks make gold more attractive. Its not so easy to trade in these markets. They are small, illiquid, and there are few securitised plays.
4. Small gold market - By comparison to other markets, the gold market is really small, so it can move with enormous volatility. A $100/oz move in gold prices is not uncommon.
At some point these high asset prices are simply not going to be sustainable because the yields on assets will be so poor. Governments however will not raise interest rates because that will undermine the debt market, as the real estate collateral is a source of market confidence. They will therefore take measures to keep asset prices high by debasing monetary units. This will effectively 'tax' holders of money/credit. Gold is really the only asset undervalued....simply because it offers no return. In fairness though, you can 'trade' other asset classes, but you will be 'carving' value out of other investors to do so; so in that game of 'financial relativism', you stand a good chance of losing.
Now looking at the lower chart, you can see that gold is in the midst of a long-term uptrend, and we now see signs of that trend holding. This comes as no surprise to a lot of people, however, at least now, you have some evidence of a trend change. In all fairness, looking at the 'upper 60-day' chart, its not the most convincing of trend reverses, however, any uncertainty will be cleared as days pass.
This prompts us to ask - what are the best ways to trade gold. Well, we go straight to the emerging gold stocks like GRY.ASX. We have often written about Gryphon Minerals (GRY.ASX) and continue to trade it off weakness, and sell when it is over-bought. Its a good story. We'll keep trading it until the company is acquired in a takeover, or it starts production.
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Profit from mining with Global Mining Investing eBook
Profit from mining with Global Mining Investing eBook
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