What if the Environment for Gold Turned Positive?
As gold has rapidly reached new heights, we are often asked if gold has “topped out?” You know it’s kind of funny how, no matter what the price of gold, conventional wisdom always says that gold is at its peak. However, the stock cheerleaders would always have you believe that stocks are poised to move up past the next hurdle or poised to rebound, whereas gold gets questioned, again and again, at every upward step it takes. You would think this would have gotten a bit old by now, since gold has gone up every year for the last 10 years, now up more than 400 percent since 2000, whereas stocks, as measured by the Dow, are actually down 5 percent since 2000, and down almost 20 percent in inflation-adjusted dollars. But hardly anyone ever asks us if stocks have “topped out.”
Nonetheless, the question always comes up when gold has a good run, as it has had lately. The reality is that gold may have peaked temporarily, in the short term. It certainly has gone up very fast, and we could easily see a correction. However, the Fed is throwing plenty of fuel on the gold fire by printing massive amounts of money to stimulate the economy.
While always a volatile asset, the long-term outlook for gold is as golden as it gets. Think about this: If gold has done this well in what we can call a generally negative environment for gold (low inflation and low investor fear), what would happen in a generally positive environment for gold (with high inflation ...