Los Angeles CA, October 4 (LCR Coin Inc.) The price of Gold hit a seven-week low this week as the yellow metal remains trapped in a three-week-old downtrend. The dollar meantime is hitting six-week highs after trending higher for three weeks.
From a technical point of view Gold remains vulnerable for a test of its 200-day moving average at $1,250. The current short term strength in the dollar allows investors an opportunity to buy physical Gold and Silver at a discount.
The inverse relationship between gold and the U.S. dollar continues due to the psychological shift towards gold when the value of the dollar decreases. That inverse relationship remains because when the dollar falls, other currencies like the yen and euro, increase in value.
This in turn increases the demand for commodities like gold because of their ability to store value for a very long time. Gold also tends to go up in inflationary environments but has shown that it does just as well during periods of low inflation.
Although the dollar is currently rallying it is expected to be just a short term bounce in a longer term downtrend—but it opens a buying opportunity in gold.
Tocqueville’s John Hathaway, says central bankers view gold as a currency, and believes the precious metal’s role in the monetary system shouldn’t be questioned. “You see central banks accumulation, they bought more gold in the last couple of years than they bought U.S. treasuries so they think it’s money,” says Hathaway.
Research from the World Gold Council (WGC) also shows that gold holds its value better over the longer term compared to other commodities.
Meanwhile, U.S. and global equity markets are hitting new records despite concerns that the markets are all massively overbought. Investors continue to hear warnings of a potential bubble forming in U.S. stock markets.
In fact, the results of a recent Deloitte survey showed that more than 80 percent of CFO’s believe that markets are overvalued. That’s the highest number of respondents concerned over valuation of the market since the start of the survey eight years ago.
Even MarketWatch noted recently that stocks are “smack in bubble territory,” from a valuation perspective. As equity prices continue to soar to new heights, the S&P 500 Index SPX, recently gave us a reading of 25.5 using the “Shiller PE” ratio.
The Shiller PE ratio, named after Yale economics professor and Nobel laureate Robert Shiller, compares stocks against average earnings over a 10 year period, rather than just one year, like Wall Street does. In nearly 150 years, when stocks have gotten anywhere close to the latest valuation, the markets have crashed.
Now that the nation’s mountain of debt has topped $20 trillion, and a war of words persists between the U.S. and North Korea, today may be the perfect day to prepare for the unexpected by diversifying your portfolio and increasing your exposure to physical gold from 10 to 15 percent.
At LCR Coin Inc., we recommend American Gold and Silver Eagle coins which come with a layer of privacy most other bullion products do not have. In addition, there are no reporting requirements by the buyer, when they are sold. So when you’re ready to join the savvy investors who leverage tangible assets to both increase and preserve their wealth call LCR Coin at (800) 830-5578.