Gold This Week: The Bulls are Running

Tuesday, February 16, 2016

You’ve probably heard of the “running of the bulls” in Spain. Every year, people gather in one of the most world’s notorious festivals, risking life and limb as they hope to outrun the famously cantankerous animals.

In the world of gold markets, “bulls” means something entirely different. These are the experts who believe that the economic outlook is hazy and even glum, which means that gold might serve as a hedge investment. The “bulls” are the ones who believe that gold is going to increase this year, even if the stock market decreases.

Negative Interest Rates: Reason Enough to Be Bullish?

Even those who aren’t traditionally as “bullish” on gold see the economic writing on the wall. Famous investor Jim Rogers, an American based out of Singapore, believes that the policies of central bankers across the world is quickly turning to folly. He recently told CNN “we're all going to pay a horrible price for the incompetence of these central bankers … This is going to be a disaster in the end.” He added, "You should be very worried and you should be prepared."

One of the policies that Rogers was criticizing was central bankers’ habit of utilizing negative interest rates as a way to stimulate economic growth. The problem: as interest rates decline and cash is more readily available but stocks continue to underperform, negative interest rates lose their stimulatory effect. As many gold investors know, an oversupply of cheap cash

Jim Grant Expresses Confidence in Gold

Jim Grant, known in some circles as a “market watcher,” and who calls himself “the world’s leading authority in when the gold market will not bottom,” feels that gold, already up on the year, will continue to go up.

“The chatter now among the monetary avant garde is negative interest rates, and then twenty-nine per cent of the world’s sovereign debt market is less than zero, so it’s not an idea—it’s a fact. And another idea on the make is the abolition of large-denomination bills and regulation of cash.”

Grant calls negative interest rates a “tax on your money,” asking, “So what do you do if you have wealth and you hear the bankers talking about negative interest rates—a tax on your money … I think gold is going to be coming into its own on in reaction to the wrong-headed notions and policies of our central bankers.” Asked if he thought gold would see higher prices this year, he said, “I do.”

A Bull Market Developing As We Speak

This week’s developments have been months, perhaps years in the making. When you consider that gold is recovering from a four-year bear market, it may be that the tide is turning the other way. Dennis Gartman, editor of the Gartman Letter, said as early as last December, “it’s time to be bullish [on gold.]” At the time, he said that if gold were to climb over $1,080 an ounce—a price it’s now achieved—he would go even “longer” on gold.

It’s not Pamplona, but the bulls are running. The only question is, will you be ahead of them?

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.