4 Reasons to Start a Long-term Gold Investment Right now

JP Buntinx
March 31, 2020

Investors all over the world are trying to seek out new market opportunities. Gold remains one of the more solid options to explore, as it has ample factors working in its favor. All of these developments seem to hint at a future price increase over the next few years.

Bond Yields Near Zero

Often considered to be a solid long-term investment, bonds have really fallen through in recent months. Most of the bonds one can purchase today have either a negative yield, or earn next to nothing on the 10-year and 30-year yield. More importantly, the positive yields are below the inflation curve for most Western countries. As such, buying bonds has become a very unfavorable option given the current market circumstances.

Unlimited Money Printing

If the Federal Reserve is any indication, there is no limit as to how much “new” money can be printed. Several stimulus packages have been announced, totaling up to several trillion dollars. That situation isn’t unique to the USA either, unfortunately. In Europe, a similar trend has become apparent in recent weeks.

Introducing more money into the economy is known as quantitative easing. While it is a short-term solution to support an economy and certain markets, the long-term consequences are problematic. It leads to less purchasing power for companies and consumers. Increasing QE puts a strain on the domestic currency, whether it is the US Dollar, Euro, or otherwise.

Volatility Index Triggers Interest in Gold

One interesting market metric is the CBOE Volatility Index. It depicts the current market sentiment, either for better or worse.  This index shows market expectations in terms of volatility. As the Index drops, there should be less volatility and unease. However, the VIX recently hit a core peak, pushing more people to alternative investments like gold and silver. 

Interest Rates Won’t Recover

Given all of the aspects above, the biggest problem remains the current interest rates. In most European countries, those rates have turned negative already. In the US, the rates were recently cut, as the situation cannot be avoided by any means. Keeping money in a savings account has no real purpose. Putting some funds into investments such as gold and silver only becomes more appealing as a result.

What About Gold Mining Stocks?

A very interesting situation has ensued as far as gold mining is concerned. Several operations around the world have lowered their production or shut down altogether. This is a direct result of the global coronavirus crisis. For some companies, it has also reduced their stock price  a bit. Not entirely surprising, as the stock markets have seen ample volatility in recent weeks.

For investors with a risk for appetite, investing in gold mining stocks can be a viable option. As all of the facets above line up one after another, the gold price is likely to increase. That may, in turn, push the gold mining stock prices higher as well. It is an option to keep in the back of one’s mind for the near future. Exploring all of the different market options is crucial to make the most of one’s assets. 

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