The chart below has been making its rounds as of late. It is a ratio of the S&P GSCI Total Return Index, a basket of commodities, to the S&P 500. It paints a very interesting picture of where commodity prices are in relation to general equities. Relative to general equities, commodities are the cheapest they have been in almost 50 years.
Cryptocurrencies are not great for your blood pressure. With prices soaring and plummeting on a weekly basis, there is a fast buck to be made, but also a lot to lose — and quickly.
It’s been hard being a gold bug these last 7 years. We’ve been mocked and discounted as preppers who live in a fantasy world where disaster awaits the global financial system at every turn. We’ve been called stopped clocks and permabears, with some justification. By the numbers we’ve been wrong, at least since 2011. In the end, numbers are all that matter in this business.
One of the market’s oldest inflation hedges appears to be in the early stages of a comeback: gold. As a decade of extraordinary policy unwinds at the Federal Reserve, the yellow metal may appear as an attractive option for investors looking to protect themselves from the eroding effects of inflation.
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Precious metals have been watching the dollar and interest rates over recent months, and they are getting conflicting signals. The dollar index tanked throughout 2017, and at the start of 2018, the selling continued. The recent rise in the price of precious metals from the middle of December has been a reflection of the diving value of the dollar against other world currencies, particularly the euro.
Gold could hit levels last seen in 2013 if the dollar extends its slide and equity markets reverse. Bullion at $1,400 an ounce is “achievable” in the next two months, Stephen Innes, head of trading for Asia Pacific at brokerage Oanda Corp., said in an interview Thursday. The Bloomberg Dollar Spot Index plunged to the lowest since 2014 after Treasury Secretary Steven Mnuchin endorsed the currency’s drop at the World Economic Forum in Davos.
Early in 2017, Donald Trump was worried the dollar was getting too strong. At the start of 2018, he has nothing to worry about. This year, the US dollar recorded an annual decline for the first time in five years. The ICE dollar index, which measures the dollar against a basket of six other currencies, fell nearly 10% in 2017. That’s biggest annual decline since 2003 when the US dollar fell almost 15%.
Gold futures gained Tuesday to mark the highest finish since early September, even as a closely watched U.S. dollar index tried to end its streak of declines. “The near-term trend remains higher for gold, and that is in line with inflation taking hold,” said analysts at the Sevens Report. “That, in turn, is weighing on real interest rates, which is bullish for gold.”
Palladium futures on Thursday climbed past $1,100 an ounce for the first time on record, leaving some traders to wonder whether palladium has the ability to continue its rally and surpass the value of gold.