In a CNBC article titled “How gold is defying the haters”, author Alex Rosenberg describes a peculiar phenomenon occurring: despite rising stocks and a strong U.S. dollar, gold has shown much resilience, holding around the $1,300 per ounce level. In Wednesday morning trading, Comex gold for December delivery was up $2.20 at $1,287.40 an ounce, and spot gold was up $5.20 at $1,286.25.
“I think the resiliency in gold has been tremendous,” said Jeff Kilburg of KKM Asset Management. “I like owning gold now, due to the fact that it’s kind of like the Rocky Balboa right now—it’s going around the ring, it’s been knocked a bunch of times, but it will not go now.”
Three things that usually spell out bad news for gold are occurring right now:
- Stocks are at all-time highs. The S&P 500 has closed near 2,000 points on Monday, Tuesday, and Wednesday of this week.
- The U.S. dollar index is near a one-year high.
- The CBOE Volatility Index (VIX) is back at levels indicating a less fear and concern about the markets.
Typically a booming stock market draws money away from gold as investors chase gains, and a stronger dollar lessens demand for gold as a hedge against inflation. But despite these challenges gold is facing, it has not fallen significantly below its resistance level of $1,300 an ounce. Many analysts don’t see gold falling any further, since few investors are likely to sell an asset that could shoot higher soon if tensions in Ukraine and the Middle East continue to escalate.
Kilburg also added that a tight trading range like the one gold is currently experiencing usually signals a bullish trend. “I think gold is coiling up. And when you see it coil up like a snake, it’s going to the upside,” he told CNBC’s Futures Now on Tuesday.
Here we see gold demonstrating its ability to retain value despite economic conditions that tend to put downward pressure on gold. Gold does not depend on credit to function and can never “go out of business”, so you can rest assured that your gold will always be there for you ready to be liquidated for cash whenever necessary. If you would like to add long-term protection that gold offers to your retirement portfolio, contact American Bullion at 1-800-326-9598 to speak with a specialist about rolling over your IRA or former 401(k) to a Gold IRA holding physical precious metals.