2016: The Golden Year?

Pure Gold and Silver Bullion Bars - Ingots

Since 2012 gold has been a rather disappointing asset right up to the very beginning of 2016 at which point the precious metal took on a new course that took it past most other commodities and placed it at the top of the investment chain in terms of performing assets.

Towards the end of February gold made a tremendous leap with a 17 % jump making it the best performing asset for the month after years of lurking in the shadows of other commodities.

Nevertheless, the rally did not last and as soon as April was over gold has been on a rather turbulent path. Towards the end of April gold was at about $1,260 per ounce and as recently as the 2nd of May gold went up to slightly above $1,300 and after 9 consecutive losses gold finally went below $ 1,200 per ounce and in light of all the other things that are going on such as consumer spending, industrial production and positive inflation reports, another rise in rates are on the table, which though would be appropriate, it would also be a negative factor for gold as the cost of holding non yielding gold increases and the further strengthening of the dollar would make the shiny yellow metal more expensive for foreign currencies coupled with an increase for risk appetite, some analysts are looking at gold to go below $ 1,100 by the end of 3rd quarter.

Nevertheless, this does not mean that gold gains are not to be expected as short bursts are expected and these bursts could be significant with increases of 10 % or more in a single day and for those who have managed to bring their averages down, this would be a good time to unload and bring averages down even lower. It all depends on how they intend to play the precious metals market. Small cap mining stocks are also hot cakes currently as many of them are extremely undervalued even with positive balance sheets which could sustain these companies for at least another 2 years without issue by which time, gold prices would definitely recover enough for these companies to unleash full capacity production which would increase the PE ratios significantly.

The fact that the current financial system is in disarray is on everybody’s mind and it is only a matter of time before the financial deluge comes and at this time, gold along with silver and other metals will probably go ballistic and those holding on to these small cap mining stocks and gold buyers owning physical bullion would be laughing all the way to the bank. According to many, buying gold at current prices is akin to buying stocks towards the end of the first quarter in 2009 when the S&P 500 Index jumped by 145%.

Based on current projections precious metals have indeed started to edge upwards on the index attributed to the lack of faith from investors plus the movement from West to East as The Shanghai Gold Exchange gains popularity.

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