Even as our world continues to appear more uncertain and less safe each day, there is plenty for Americans to be thankful for this Thanksgiving holiday. This is particularly true for gold buyers this holiday season!
Anyone interested in adding an allocation of gold to their portfolio got an early Christmas gift on Wednesday, as the gold spot price plunged below $1,200 per ounce ahead of the holiday on Thursday.
Here are a few main reasons that precious metal investors have to be grateful.
1. Bargains Abound
First and foremost, the nine-month low in gold prices is an potential buying opportunity for value-oriented investors. There are bargains to be found in both gold and silver thanks to the post-election cool-off for the precious metals as well as the sharp drop that coincided with yet another rally to a 13-year high for the U.S. dollar on Wednesday.
Besides gold faltering due to the strong dollar, the spot silver price is likewise testing fresh lows around $16.50/oz. This is far cry from its 2016 highs above the $20/oz mark. The slip for gold below $1,200/oz was the first time this level had been breached since February. This could prove to be a rare moment to "buy on the dip."
2. Fed Rate-hike Bets
A number of factors are playing into the market's near-certainty that the Federal Reserve will raise its benchmark interest rate, known as the federal funds rate, at the December meeting of the FOMC.
The fact that four rate hikes were projected for 2016 and December now stands as the first—potential—move since last December (2015) speaks to the precariousness of the Fed's plan to normalize interest rates from their current near-zero position. In the Thanksgiving spirit, this makes the FOMC members a bit like interest-rate pilgrims who are entering uncharted territory.
3. Political Football
Even as the furor over the U.S. elections has died down, the general climate of political uncertainty is unlikely to abate as quickly. 2017 is rather likely to offer plenty of surprises, both in American politics and abroad (particularly in Europe), which should translate into further safe haven demand for the precious metals.
Harking to a beloved Thanksgiving tradition, we could see a great deal of "political football" being played in the U.S. as the new president attempts to get his legislative agenda through Congress. For instance, President-elect Trump's call for greater infrastructure spending may not receive popular support among fiscal conservatives in the Republican-controlled House of Representatives and Senate. This doesn't even account for opposition to other parts of Trump's plans by congressional Democrats. Any protracted battles between the executive branch and the legislature would seem to take on added importance in the Trump Era, strengthening the case for holding precious metals rather than dollars.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.