Here at 212 Research, we a really strong believers of the fact that we’re going to see gold prices, at the very least, retrace their steps back to their levels from 2012 where we saw highs in/around the $1,900 range. If you think about it, everything from the amount of monetary easing that’s been going on in the world, the inflationary pressures that are going to ultimately kick in and drive real interest rates into deeper negative territory, to geopolitical issues and tensions all around us, we believe there are enough factors developing, that the inevitability is real enough to get us there, and then some.
As mentioned above, when it comes to Gold there are many indicators, and factors, that come into play. We think a very strong indicator of gold prices is real interest rates, or rather, interest rates minus inflation. There’s always several interest rates to choose from. Below I’ll show you a chart of the Fed 10-year Treasury yield minus inflation. (The black line with a tan fill). We’ve charted gold against it as a blue line.
What you’ll notice here is the real 10-year yield was recently 1.93%. That’s different from Friday’s headline 10-year yield of 2.28% because we deducted inflation, which is a key factor here.
You can also see that real 10-year yields peaked in January. They’ve slid lower ever since. They bounced last month. At the same time, Gold has been in an uptrend since the end of December. It recently peaked at the same time that the real 10-year yield bottomed.
That’s not a coincidence.
So what’s next? We believe the real 10-year yield could rally up to that downtrend. That in turn, should push gold lower. But that’s not definitive by any stretch.
Why does that happen? Because the real yield reflects what you get on a Treasury minus inflation. If inflation is eating up your Treasury yields, you look for other investments. Perhaps one that is historically a hedge against inflation.
That’s why we watch the real interest rates as one of the main indicators for where gold might go next.
I have to add, and this is important! – – This is all in the short term – – Longer term, gold looks so bullish that it’s laughable when I listen to the bears. They’re standing in the path of history’s steamroller. One fundamental force after another is lining up to push gold higher, plain and simple.
So, while we are anticipating a slight pullback in Gold and mining shares, and if that does in turn happen, there’s only one thing we will say… You jump on that opportunity, and cover it up like a wet blanket.
While we love the Yellow Metal long-term, we also look for opportunities in smaller Gold Mining companies with solid assets. It’s these opportunities that present the greatest growth increases and have made us small fortunes over and over again.
READ THIS REPORT, it goes into detail on how you can really cash in on a small Gold play, previously owned by non-other than Barrick Gold. It’s a real play, with great assets, and solid Management. – – A must read for anyone serious about making some strong portfolio returns in the Gold Sector – –
212 Research Team
Source: 212 Research
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