The U.S. dollar cannot catch a break these days. It’s sunk to the lowest level in months and there’s no parachute to slow the descent. Neither inflation nor higher interest rates are likely in the short or even medium term. The U.S. economy is not growing fast enough, which prevents the Federal Reserve from raising interest rates. There’s little doubt that a gold investment in 2018 would be wise.
Indeed, investing in gold before 2018 might be wiser. The gold price in 2018 could push and break the $1,400-per-ounce barrier. But that’s just the beginning, because if the gold price forecast for 2018 has taken a favorable turn, then gold future price predictions are even more bullish. If you have been wondering what the best way to invest in gold is, or how to invest in gold, 2017 has provided a textbook example.
During the second quarter of this year, gold prices fell slightly. Yet they never stayed below $1,200 per ounce for too long. Perhaps expectations that Trump was going to ease geopolitical tensions with Russia helped to reduce risk. More importantly, the Federal Reserve raised interest rates three consecutive times, most recently in June. That added more pressure, hurting gold and precious metals in general, as it were.
The proof was in the pudding, as they say. All it took to reverse the course of gold prices was an admission from Fed Chair Janet Yellen. She conceded that, after all, the U.S. economy is not performing quite as well as everybody thought. The most optimistic gross domestic product (GDP) growth statistics of about 1.7% are far below expectations. Trump said that he would boost the annual economic growth rate to three percent, but that seems unlikely if not impossible now.
The Economy Is Not Performing All That Well
There is a perception that the economy has been performing well. The news headlines blaring out of radios and TVs can’t hold back their enthusiasm. Pundits on the ever growing list of financial news shows from New York, London, and Hong Kong speak of bullish scenarios. It was just a few nights ago that a serious-looking analyst, wearing a colorful but respectable tie, proclaimed that the current bull market run on Wall Street—already nine years in the running—has a decade or more left in it.
But does it? Predicting the continuation of a sustained market run is like predicting the weather a year from now. Except that the weather gives us more tools to work with. There are actual atmospheric phenomena that can be tracked and interpreted. They tell us if it’s going to be sunny or rainy, cold or warm. So far, stock market analysts haven’t come up with as “accurate” predictive tools, let alone ones able to predict stock valuations months in advance.
You might think gold suffers from the same predictive dilemma. But, in fact, gold has been around so long that the tools or mechanisms we use to understand its price fluctuations can be more easily and reliably understood. Unlike the individual stocks that make up the exchange market, the factors that move gold up or down are more general, which is reassuring for those interested in gold investment.
After that premise, the big picture now has become rather clear. This makes it easier to make gold price predictions. The gold price in 2018 should be considerably higher than now. It seems likely that gold could hit a price of $1,300 per ounce before the end of August 2017. But, a cluster of risks is building around Washington, which could spread to Wall Street before the end of the year.
One of these risks is President Donald Trump’s impeachment. This does not mean that we encourage or agree with it, but it’s a realistic scenario that cannot be ignored. Given the past experience with Bill Clinton, who had actually managed to execute some of the policies he wanted, the United States could be looking at a turbulent 12 months ahead.
Rising Fear Benefits Investing in Gold
The “psychological” factor of an impeachment on the course of the markets alone could add a few hundred dollars to the price of gold, which makes gold investment in 2017 seem like a good idea. In Trump’s case, there’s the additional negative energy that comes from deflated market expectations. Since November 2016, the stock market has added some 4,500 points to the Dow Jones. That’s in less than a year! But with Trump gone, the strongly pro-market policies like major tax cuts and penalty free repatriations of American capital from abroad won’t have the foundation on which to rest.
Thus, gold has plenty to gain for the rest of 2017. It could gain far more in 2018 on the back of fresh geopolitical tensions building on top of the existing ones. They would combine the growing instability surrounding Donald Trump with a chaotic international situation. If the market has been quiet for gold so far, gold investment in 2018 could get very loud indeed.
Source: Lombardi Letter
