SDI Magazine News Feature: Waiting on the Gold Bubble to Pop

The world has "gone crazy," and safe-haven investments have gone crazy right along with it. After months of buying up gold and other precious metals in preparation for stock market volatility that has manifested in full at this point, fans of the yellow metal are shocked to find that perhaps they should have invested in toilet tissue instead. While wipes went through the roof in value as the coronavirus COVID-19 spread through the United States, the stock market tumbled and, in an unusual move, gold values fell as well.

Longtime gold bull Peter Schiff blamed "clueless investors" who have a "mindset similar to that of central bankers." Schiff is optimistically predicting that the gold bubble will "pop," meaning values will pop up, when investors "figure out en masse...how bad the consequences of the current monetary and fiscal policy mistakes will be."

However, as BlockTower Capital CIO Ari Paul noted in response to Schiff, in 2008, gold fell from $1,000 to $775 an ounce despite intense market volatility at that time. Paul tweeted, "[Gold] always falls when equities collapse. I think it will do well at some point fairly soon, but no pointing owning it at its highs."

George Milling-Stanley, chief gold strategist at State Street Global Advisors, disagreed. "The benefit of having gold is that it is an incredibly liquid asset," he explained. "Gold is doing exactly what it's supposed to do in a liquidity crisis." Gold prices earlier this week hovered around $1,500 an ounce, about the same as this time last year.

However, for investors who expected gold prices to soar in 2020, just holding steady isn't nearly enough. As a result, many are opting to sell off their gold holdings, which is further depressing gold prices. If the expected stimulus package passes in the Senate and, as U.S. Treasury Secretary Steve Mnuchin described it, "attracts $1 trillion [or more] into the economy," then gold prices might go even more haywire. This is frustrating for investors who just recently watched gold rise to a record $1,704 an ounce just over a week-and-a-half ago.

Do you think gold values will rise over the summer, or is the bull market over?

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Author: Carole Ellis
Carole Ellis is the editor-in-chief of Self-Directed Investor Magazine. Learn more at SDIMagazine.com or email her at [email protected]
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