Gold up sharply

Reuters/2-15-2017

Consumer prices post largest gain in nearly four years

“Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.”

MK note: After a minor waterfall drop earlier this morning, gold has rallied sharply off the $1217 low.  Now trading at near $1231.  Not sure what prompted the rally, but one thing we’ve noticed in the trading pattern is that gold is finding significant support on downside corrections.  It comes quickly and usually during the same trading session.

We have hinted here before that professional money is supporting this market which has begun to trade an inflationary bias. That bias was confirmed by the .6% gain in consumer prices in December, reported earlier today, and that could be what’s behind gold’s rally.  Of course, chairwoman Yellen is talking an inflationary line with her warnings about another interest rate increase.  As we have mentioned here consistently, the Fed is likely to chase the inflation rate higher rather than attempt to stop it in its tracks. Real rate of return will become an issue particularly among well-heeled, old line money managers, and that is where gold bobs to the surface as an important factor in portfolio allocations.

Gold is up almost 6% thus far this year and 9.2% from its December low of $1128 per ounce.  Do you remember this chart and commentary first posted 12/10/16?

observationgoldtrading2016Click to enlarge

What are we advising now?  The same thing we always advise.  If you do not own gold and silver currently, fix your sights on a percentage of your portfolio you think would make for a proper diversification and then work toward achieving that target.  None of the negative elements in the economy that launched and supported gold’s long-term secular bull market since the early 2000s has been addressed in a meaningful way. They are not likely to be for a long time to come, and watching the way Washington operates buttresses that notion.  If you do not own enough gold and silver to afford adequate protection, add more now while the price is low.

As published in our most recent News & Views newsletter:

Gold in five easy lessons

1. Don’t buy it because you need to make money; buy it because you need to protect the money you already have.

2. Don’t look at price as a barrier; look at it as an incentive.

3. Don’t buy its paper pretenders; buy the real thing in the form of coins and bullion.

4. Don’t fall prey to glitzy TV ads; do your due diligence instead.

5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.

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