Three Major Reasons for Gold in 2016.

golden_grgolden_gr Posts: 664 Bronze ✭✭✭
Presented by: Advantage Gold


This year looks to be another one of increased volatility as the market see-saws in different directions. Here are three compelling reasons why 2016 may be the perfect time to add gold to your portfolio.



1: “Stay the Course”

Financial experts often mention that “buying and holding” stocks through good and bad times is the best way to guarantee returns.

Investors that bought equities before the Financial Crisis have had a 20.2% return up until January 25, 2016. They “stayed the course” and were rewarded with an eventual return.

However, those that held gold during that same time period until today have had a 48.6% return, which is more than double that of the general market. This is even true with gold declining roughly 40% from its peak since late 2011.

Does it make more sense to “stay the course” in 2016 with stocks, or gold?

2: Two-Term Presidents

The last four presidents to serve two terms have had stock markets rise significantly during their tenures.
However, the stock markets also suffered catastrophic losses in each of their final years as president.

For example, during George W. Bush’s tenure, the S&P 500 nearly doubled from a bottom of 801 during the Dotcom bust to a peak of 1,562. Then the Financial Crisis hit at the end of Bush’s second term and the market went down to 677 points.

Obama is now in his last year, and the market is up 178% from its bottom in 2009. Will the trend continue?

3: Oil vs. Gold

Oil and gold have a relatively strong historical relationship. They are hard assets that move similarly in inflationary environments.

However, gold and oil also have some major differences in how supply and demand tends to affect the price.

Oil: Every day the world consumes 93 million barrels of oil. However, over the last two years there has been an excess of supply coupled with weakening demand from China and a slowing world economy. This has led to oil falling from over $100 per barrel to $30. Despite this glut, OPEC continues to produce record amounts of oil to maintain market share. Oil is delivered and consumed, and these fundamentals of supply and demand closely apply. More supply + weakening demand = lower prices.

Gold: Meanwhile, gold miner production is expected to peak in 2015 or 2016, and to decrease from there. Since gold is mostly traded via paper markets and not delivered, the nearly five-year low price point for gold may not fully reflect its supply and demand fundamentals. Gold discoveries are rarer than ever, and the cost and risks to mine are very high. Yet, this declining output is not yet seen in the gold price.

Gold to Oil Ratio
Lastly, the ratio between these two goods helps to explain what is going on in the world. Gold represents a safe haven during times of financial stress, and oil represents the overall health of the economy and industry.

The gold to oil ratio is expressed in the amount of oil barrels that can be bought with 1 oz of gold. A lower ratio means that the economy is doing well. Meanwhile, history shows that whenever the ratio is above 20, there has been some type of market crisis.

Today, this ratio is higher than ever in history at 37.

Would you rather own oil or gold?

Source

Comments

  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    edited February 2016
    @golden_gr

    The current economic crisis is low oil prices caused by the Saudi's opening the taps to flood the world with oil, yet at the same time borrowing money to fund social programs because the oil revenues are insufficient. The goal is run US oil producers out of business. It is working - but at the cost of tens or even hundreds of thousands of jobs globally as oil companies and oil services companies slash jobs. All of these unemployed workers stop spending and even the employed workers stop spending in preparation for unemployment. This has an immediate effect on local, regional, national, and global economies.

    Gold is money and everything else is credit ~ @Sash
  • golden_grgolden_gr Posts: 664 Bronze ✭✭✭
    @79Au197 , right that's true.
  • rohanibuang61rohanibuang61 Posts: 2,379 Gold ✭✭✭✭✭
    edited February 2016
    @golden_gr @79Au197 I am just wondering who instructed Saudi to open the oil taps, blatant attack towards its neighbors or the same phenomena happened in 1973 during the Nixon and Kissinger planned with petro-dollars.
  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    @rohanibuang61

    Even though I used the phrase "opening the taps", the truth is that they held production constant while the rest of the world "opened their taps". The Saudi's held their production constant, while borrowing money for the first time ever to fund social programs previously funded by oil revenues. Too much oil, not enough demand. Oil price plummets.

    In 1973 the Saudis actually cut oil production resulting in oil shortages, gasoline rationing, doubling of oil price, and high inflation.
  • rohanibuang61rohanibuang61 Posts: 2,379 Gold ✭✭✭✭✭
    @79Au197 My deep feelings that anything created by God is meant to prospering human activities and sufficient to everyone just like Gold and Silver. Unfortunately they are manipulated.
    For simple reason, oil is black gold that keep on global leaders and nations hunger and greed.
    I remember the Rothschild keyword "give me power to control money and I will control the nation".
    So keep on opening or off the taps is part of the dirty power games.
  • golden_grgolden_gr Posts: 664 Bronze ✭✭✭

    @79Au197 My deep feelings that anything created by God is meant to prospering human activities and sufficient to everyone just like Gold and Silver. Unfortunately they are manipulated.
    For simple reason, oil is black gold that keep on global leaders and nations hunger and greed.
    I remember the Rothschild keyword "give me power to control money and I will control the nation".
    So keep on opening or off the taps is part of the dirty power games.

    true!
  • AMALGAM11AMALGAM11 Posts: 202 Bronze ✭✭✭
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