Gold has had a great year so far: Thru August 22, 2016, it is up 24%*. Compare that to the Dow Jones which is 8% year to date**. That’s all wonderful, but where does Gold go from here? A good indicator is the US 10 Year Treasury. This is the benchmark for interest rates around the world. The current rate for the 10 Year Treasury is just 1.58%. Subtract the inflation rate of 1.00% from that normal rate and you are left with a real interest rate of just 0.58%. When interest rates are low, as they have been, investors are more likely to pour into Gold (and Silver) helping to drive the price of the precious metals up. Conversely, when rate are going up, investors (and guys like me) will chase the upward rates, resulting in most likely lower precious metals prices***.
* APMEX website
** Historical quotes
*** Daily Wealth Trader. August 16, 2016
These are the opinions of Ben Morris and not necessarily those of Cambridge, are for informational purposes only, and should not be construed as investment advice.