“The only thing better than one Golden Retriever is two more Golden Retrievers.” Anonymous
These are broad areas that have been getting stronger:
- Ireland
- France
- Spain
- Gold
These are broad areas that have been getting weaker:
- Israel
- Regional Banks
- Real Estate
- Retail Companies
Source: Dorsey Wright and Assoc./Thomson Reuters
(See complete List by clicking here:Monthly Trends)
As you can see, gold is on the “getting stronger” list. There are lots of ideas on why gold goes up and down. A common reason many people think is during periods of financial crises. While that may be partially true, historically, I don’t see it as a reason for big moves in this precious metal. During the financial crises of 2008 (Jan – Dec 2008), we only saw gold go up approximately 5.0%. Not much of a hedge when the S&P 500 went down approximately 35% that year.[i]
So, what does make gold move? In my research and experience, there are only two major reasons for moves in the price…deflation and inflation. Between these two, I believe inflation seems to be the biggest culprit. We saw this quite dramatically during the high inflation period of the late 70’s. In fact, from January 1979 to January of 1980, while inflation went up from 9.3% to 13.9%,[ii] gold had a monstrous move. The price moved up from $235.00 oz to $882.00 oz.[iii] A 275% return! That, my friend, is a big move. I have no idea if gold will ever move like that again, but it does give us some idea of what types of situations can have more of an impact.
Why is it moving now? Since, I believe inflation is historically the biggest reason, we can look at the U.S. and overseas, to get a fuller picture of inflation. In the U.S., our year over year inflation came in at 5.0% (March 2023).[iv] But, it looks bigger across the Atlantic. If we look at the 19 countries that use the euro, they have an average inflation of 6.9% during this same period (March 2023, year-over-year). However, the range is pretty vast. The country with the lowest inflation is Luxembourg at 2.9% but the euro country with the highest inflation is Latvia at 17.2%. Even Germany is at 7.8% and Sweden is showing inflation at 8.1%.[v]
With all this inflation being very high, I believe, it is the biggest contributor to the price of gold strengthening. With gold sitting around $2,000, can it go higher? If global inflation is not reigned it by the various central bankers, it could be possible.
As always, I enjoy interacting with you! Feel free to contact me with any thoughts and questions. You can email or call me…my phone is with me all the time. I look forward to speaking with you soon!
Michael
Michael S. Lewis
President, Wealth Manager
Anchor Wealth Management
358 NW 1st Ave, Suite 2, Canby OR 97013
(503) 910-1687
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Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
i Thomson One
ii St. Louise Federal Reserve
iii Investing.com
iv Federal Reserve
v Eurostat
Content in this material is for general information only and not intended to provide specific advice or recommendation for any individual. All performance referenced is historical and is no guarantee of future results. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
[i] Thomson One
[ii] St. Louise Federal Reserve
[iii] Investing.com
[iv] Federal Reserve
[v] Eurostat