This spring we sent out an alert to our clients stating that we believed the price of gold had finally broken out of a four-year decline. Since then, gold has made a confirming move to over $1,370 per ounce. The recent drop to the $1,250 level may leave some wondering if this move was a false move or just a healthy pullback.
When bull markets turn, they rarely do so in dramatic fashion. The painful bear market is still fresh in people’s minds, thus initially the market climbs what long time market participants call a “wall of worry.” Where does the price go from here between now and the beginning of 2017?
The answer is, nobody knows for certain. One can draw on history to make a case for a gold to pull all the way back and retest the $1,050 breakout level. Others can make a case for the immediate resumption of the upward trend. We take no sides in these predictions. Many a gold dealer has used hype and cheer leading to drive short term sales. That’s just not our style.
Rather, we like to focus on why our clients own gold and silver in the first place and how to best use our technology platform to serve them as they seek to achieve their goals in 2017 and beyond. And as we turn the corner on 2016, there are several factors that we believe support the resumption of a longer term bull market in gold and silver.
Confidence In the World’s Systems Will Erode in 2017
#1 The Global Economy
The global economy is in the seventh year of an anemic expansion. That is a historically long expansion and at some point another recession is inevitable. Central Bank policies are already coming under scrutiny as being ineffective, so when the next recession arrives business and household spending will likely contract quickly. Add to that, in the United States Medicare and Social Security are set to “go negative” in 2017 and Obamacare is forecast to come under extreme pressure.
Domestic politics are a mess in the United States. The conclusion of the upcoming Presidential election will not bring an end to the division, but rather will only magnify it. And the President will not be able to unite them because the differences on too many issues are diametrically opposed to one another. Additionally, geopolitics are also in turmoil. This summer’s “Brexit” was the first indication that a backlash against globalism is real. The anti-establishment mood will carry on well into 2017 with contentious elections in France and Germany which will create further erosion in the confidence of the Western world’s people in their leadership.
#3 Military Confrontation
Amid the distraction that the United States election has caused, the majority of Americans are not aware of how far relations have deteriorated with Russia, China, and many Middle Eastern nations. China is provoking the United States in the South China Sea. Russia has become more aggressive in Syria and eastern Europe. Tensions have reached a point where historically, a direct conflict between the larger players is a real possibility. If it were to occur, it is difficult to predict if and how that conflict would be contained.
Why will the price of gold and silver shine in 2017?
There are many reasons people own gold and silver. One of the most frequent is as insurance against economic and geopolitical instability. 2017 is shaping up to be a year loaded with both, which is why the intermediate to long term outlook for gold and silver should see the resumption of the upward trend that began early this year.