Gold has recently hit new highs. It’s time to ask, “Is it time to short gold?”
Historically, gold has been a commodity that investors flock to when the dollar loses value, often during times of inflation. Gold prices have shot up since the recession due to low fed rates and the stimulus package, which flooded the market with liquidity, devaluing the US dollar.
Now that gold has hit these peaks, we must consider whether it’s time to become bearish. As Evan said in last week’s meeting, the recession is technically “over.” The DOW is back over 10,000, and consumer confidence is way up from February (it was in the 20’s then and is up around 50 now), signaling that we are in the midst of significant economic recovery.
Fed rate futures indicate that investors believe the Fed to begin raising rates in April or May, which will reduce liquidity and help to raise the value of the dollar. The dollar is also sure to increase in value with the recovery of the American economy because foreign investors will need dollars in order to invest in American companies. Finally, the Fed does not believe that inflation is a worry in the current economic climate.
These indicators seem to show that gold will not be as juicy of an investment for long. And, having just hit new highs, it has a far way down to go.
Historically, gold has been a commodity that investors flock to when the dollar loses value, often during times of inflation. Gold prices have shot up since the recession due to low fed rates and the stimulus package, which flooded the market with liquidity, devaluing the US dollar.
Now that gold has hit these peaks, we must consider whether it’s time to become bearish. As Evan said in last week’s meeting, the recession is technically “over.” The DOW is back over 10,000, and consumer confidence is way up from February (it was in the 20’s then and is up around 50 now), signaling that we are in the midst of significant economic recovery.
Fed rate futures indicate that investors believe the Fed to begin raising rates in April or May, which will reduce liquidity and help to raise the value of the dollar. The dollar is also sure to increase in value with the recovery of the American economy because foreign investors will need dollars in order to invest in American companies. Finally, the Fed does not believe that inflation is a worry in the current economic climate.
These indicators seem to show that gold will not be as juicy of an investment for long. And, having just hit new highs, it has a far way down to go.
By Alex Green
Posts
1 comment:
I would disagree. The bull market in gold and silver has just begun
Post a Comment