Data Driven Investor: Precious Metals About to Break Out?

Gold has been hitting new all-time highs. And not just in the U.S. dollar, but when compared to other currencies also. While the price movement hasn’t been as exciting as the stock market or cryptocurrencies, it could still trend higher.

Several factors are coming into play that are bullish for precious metals, particularly gold. As these trends play out, the next big multi-year move higher could be ahead.

The biggest factor is simply supply and demand. New gold finds have been light in recent years, and haven’t been enough to meet demand. Inventories are declining.

Even without a big surge in demand, gold prices may continue to trend higher.

Next, globally, inflation has come down from the past two years. But it’s still higher than average. And fully getting inflation out may not be politically feasible.

Gold tends to work best as an inflation hedge, and ongoing inflation could continue to push prices higher. 

Meanwhile, emerging market economies have been stockpiling gold for some time. A few countries such as China and Russia have even increased their allocation to the metal.

Finally, with prices trending higher, investors may add to precious metals holdings to play the momentum. With the big rally in other assets, buying some precious metals creates a non-correlating diversified asset.

In short, gold may have further moves ahead, even at all-time highs.

To read the full analysis, click here.