SG Wealth Builder

To make money. To build wealth. To preserve wealth.

Buy gold bullion now?

In 2016, Brexit set fire on gold and ignited a rally in gold price. In 2017, it was newly elected US President, Donald Trump who ignited an unexpected gold price rally with his controversial policies. Should wealth builders buy gold bullion now?

In my own opinion, every leader is entitled to defend his country’s national interests. Whether Donald Trump’s policies, which have been viewed by many critics as being protectionism, will lead to a stronger United States is subject to debate.

But Trump’s actions certainly create a lot of market uncertainty. And one of the things that investors hate most is uncertainty. Due to this, investors flee for safety and buy gold bullion. Since Donald Trump took office, gold price has rallied to USD1233 per ounce. On the current form, gold price is certainly very bullish and looks to rise further in the short-term.

gold

Based on data released by World Gold Council, gold has a mixed performance in 2016. While the price has recovered from a low of USD1067 per ounce since end 2015, demand for gold bar and coin has dropped by 2% year-on-year. This is because many investors has been put off by the high price of gold in 2016.

The big players, namely the central banks, have also bought fewer gold bullion in 2016. Demand fell by 33% to 384t for the year. Despite this, 2016 was the seventh consecutive year of net purchases by central banks.

In my point of view, it is unlikely that the current gold price rally is sustainable in the long run because the Trump effect will likely to fade in a couple of months. The interest rate hikes by US Federal Reserve should have a more influential effect on the direction of the global stock markets and gold price. Typically, interest rate hikes would result in a correction in gold price because of the opportunity cost of holding gold bullion.

The interest rate hikes, coupled with the political uncertainty and slowing global economy, should see gold price hovering between USD1200 to 1300 per ounce. This is some way off the peak of USD1800 per ounce seen in 2012. Thus, from the long-term perspective, there is still a lot of potential for gold price to increase further if wealth builders purchase at current valuation.

Gold and Silver Bullion

As a wealth builder, it is important to diversify our portfolio in different asset classes. Traditionally, bonds are seen as a good way to diversify risks but with interest rates increasing in recent years, bonds may not be a viable solution for risk diversification. Nowadays, gold bullion is being regarded as a mainstream investment instrument to diversify risks in portfolio.

Another signal to buy into gold is when the stock market has peaked. Recently, the Dow Jones has crossed the historic milestone of 20,000. This is a record for the US market and it reflects a lot of greed in the stock market. A market correction may be on the card and perhaps it is time for investors to calibrate their risk appetite and avoid being too bullish in shares investment.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Magically yours,

SG Wealth Builder

SG Wealth Builder

SG Wealth Builder

Click here to return to home page

Updated: February 14, 2017 — 2:25 pm

6 Comments

Add a Comment
  1. i was convinced that gold would rise in price before xmas but did not happen . but trump has now declared his hand and with the prospect of a lower value dollar and a large spent on infrastructure to add to a massive budget deficit gold has a greater reason to increase in value

  2. Since gold price peaked at USD 1900, it’s performance is abysmal. There were many false starts but sputter repeatedly soon after. There is no genuine, convincing lift despite much global turbulence.

    It is worse than an impotent man trying to work himself up but no avail. If gold really has an intrinsic value or an hedge against uncertainties, it would have risen long ago.

    Every time, there are signs of stirrings, false prophets abound would howl ‘wolf wolf’.

    Cheers.

  3. Hi Fred,

    Agree with your views but with gold, there is a need to have a different mindset.
    You can invest in gold like you invest in stocks. For the past few years, the global economy has gradually recovered from the Great Financial Crisis, that is why the price declined substantially. But if you look at the trend for the past 30 years, gold price has stormed from USD 300 per ounce to peak at USD1900 per ounce. This is an astounding ascend!

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

  4. Hi John,

    Agree with you. But if I were to accumulate gold bullion, I would prefer to buy on price dip.
    For the year 2016, gold price has shot up by 20%, making it expensive for investors to buy.
    Hopefully 2017 will see a moderate increase in price.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

  5. Spot gold appears to have put in a base and prices are now rallying. |
    Prices have got back above the 20 DMA but are still below the 61.8% Fibo of last year’s rally.

    Keep in Touch – http://www.equityprofit.com

  6. Hi there,

    Yes, indeed forecasting the price of spot gold is very tricky nowadays.
    The volatility seems so great that it makes the precious metal so enigmatic to hold as an investment.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

Leave a Reply

SG Wealth Builder © 2016 Frontier Theme
%d bloggers like this:
More in Gold; portfolio management
gold bullion Singapore
Golden start for gold price

What a golden start for gold! Since the beginning of 2017, gold went on a rampage and increased in value...

Close