*Why Gold should rally further* - AnAnthem In Equity (Twitter: @geordiejob)
Investors are losing confidence in their governments all over the world with regard to their financial policies. If even one big fund house starts selling, it could quickly spiral into large selling. There's no more space for Govts like USA to cut interest rate further and keep the economy growing through credit growth. Almost all interest rates are nearing Zero and in some European countries, it's already in the negative rates..i.e., if the borrower takes 100, he is expected to repay only less than 100 to fund consumption and investment! This is crazy.
Countries are increasingly beginning to suspect US Dollar as their reserve currency due to the humongous debts and crazy policies of US Govt. Trust is the factor for US Dollar as common currency. That's shifting. In Dec, the other trusted currency Swiss Franc started its growth. US Dollar is being converted to Swiss Francs by some. In all these confusions, Gold will be an obvious candidate as a common currency.
Other geopolitical conflicts like China Trade War, Iran issue etc are also prompting countries and fund houses to derisk their holdings by shifting into Gold.
Upcoming elections in USA in coming March is another reason for investors to shift to Gold. They may dislike Trump going away because Trump, in spite of his tantrums, was a darling of the market. So, the prospects of Trump failing will have huge short term problems which can become mid-term problems too. There again, it's. a reason for Gold to rally further.
Gold is just 2% of the global tradable liquid asset. (Yet to verify - Source is a random comment in TV) Even a small movement from other asset classes to Gold can create huge implications in Gold.
Therefore, due to the interest rate problems, geopolitical problems and upcoming US elections, Gold has huge chances of rallying further considering the miniscule percentage of Gold as a liquid asset class currently in global markets.
- Geordie Job Pottas
Twitter: @geordiejob