Gold Is Now Like a Coiled Spring

It would be a big mistake to underestimate the current upside potential of the gold market. The yellow metal is poised at the closing spot price of $1,322 per ounce on August 29, 2016 – just above its support price of $1,315.
 
Two Deutsche Bank analysts, Michael Hsueh and Grant Sporre, have just released a report declaring gold could spike to $1,700 per ounce in its next big move. The thinking here stems from the balance sheets of the principal central banks (the U.S., China, Japan, and the European Central Bank). Since the beginning of 2005, they have increased by 300%.
 
In their report, Hsueh and Sporre have observed a correlation between the price of gold and the rate at which central banks have purchased gold stocks to expand their balance sheets. Also, above-ground stocks have increased by 200%. In their view, if central bank balance sheets grow to accommodate above-ground stocks, gold should be trading much closer to $1,700 per ounce.
 
Investors now also need to be looking at China, the world’s second biggest economy. The Chinese devalued their yuan in August, 2015. One year later, the problem is they’re using that weakened currency to boost their tottering economy by masking enormous public and private debt.
 
Michael Arone, Chief Investment Strategist for State Street Global Advisors, feels the issue of Chinese debt is potentially a much bigger economic problem than even Brexit.
 
The International Monetary Fund has forecast that China’s losses from corporate loan defaults alone could exceed 7% of its gross domestic product (GDP). The consulting company, McKinsey & Company, sees this figure growing to an unmanageable 15% if China continues its easy lending practices.
 
As if China’s debt problem weren’t enough to derail the global economy, Japan’s Government Investment Pension Fund (GIPF), the world’s largest pension fund, lost $50 Billion last year as a result of poor stock market results. GIPF’s stock dropped 10.8 percent on domestic stocks, and 9.6 percent on international stocks.
 
Since Japan is the world’s third largest economy, according to nominal GDP, the international consequences of its pension fund failures are immense.
 
Japan’s problem is simply a microcosm of the international economy at large. It is tremendously inhibited by deflation. Central bankers have tried various kinds of stimulus from quantitative easing to negative interest rates, none of which have worked.
 
Moreover, the price/earnings ratios of stocks are now anemic, and bond yields are pitifully low.
 
Our own Fed is sending out mixed signals about whether it will raise interest rates.
 
Hedge fund managers like Stanley Druckenmiller are beginning to take substantial positions in the shiny metal.
 
If you’re looking to protect your nest egg, then, against a contracting global economy, weak equity returns and poor bond yields, now is an excellent time to invest in the yellow metal.
 
Right now, gold is like a coiled spring. Its upside potential is strong and is price attractive. Why not take a position now before the crowd gets in?
 
For more information, call 800-777-6177 now, and ask to speak to a Fortress Gold Group representative.

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