The 2017 Gold Forecast

Editor’s Note: For the past several weeks, Members have been asking about the forecast for gold and precious metals in 2017.

We’re happy to oblige.

The resource sector plays an important role in the Club’s strategy allocation model, The Oxford Wealth Pyramid.

First off, the Club recommends Members allocate 5% of their Core Portfolio to precious metals. (Chief Investment Strategist Alexander Green suggests the Vanguard Precious Metals and Mining Fund.)

Investing in metals is also a perfect way to take advantage of Targeted-Sector Assets. After all, many miners tend to move in lockstep – especially during an industry-wide bull market. Why fight against the trend?

In today’s article, Emerging Trends Strategist and Oxford Resource Explorer Editor Matthew Carr tells Members where he sees gold heading this year.

If after reading you have any additional gold questions, please email Matthew at mailbag@oxfordclub.com.

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From the Baltimore Clubhouse – Gold and uncertainty are friends.

The two go hand in hand. The world’s favorite precious metal is a fear and inflation hedge.

So when fear and uncertainty are high, gold does well.

That said, in the current market, gold has a difficult hill to climb. It pays no dividend or interest and has no balance sheets to look at.

Last year was an election year.

And that always triggers anxiety.

In 2016, gold demand inched 2% higher to a three-year high of 4,309 metric tons. That wasn’t too exciting. But within those numbers we saw two very different trends at play.

For example, inflows into ETFs were the second-highest on record. The 532 metric tons scooped up by ETFs were second only to the 646 metric tons that flowed into ETFs during the financial recovery in 2009.

But we can see the effect anxiety has on the price of gold.

During the first three quarters of 2016, ETFs gobbled up gold… From January to July 6, gold’s price shot up 31.5% as Brexit fueled uncertainty. By September, gold prices had slipped, though they were still up 23.9% for the year.

And then, in the final quarter of the year, there was a drastic shift…

The price of gold dropped 13.4% over the following three months.

A lot of that had to do with the U.S. election and the probability of the Federal Reserve raising rates. ETFs did a dramatic about face and saw outflows of 193 metric tons.

When all was said and done, gold ended 2016 up 9%.

But it was a wild ride for an investment considered to be a safe haven. And once you took out the emotional roller coaster, the fundamentals of gold weren’t much to write home about.

Last year, gold suffered two black eyes. The first was jewelry demand, which fell to a seven-year low because of weakness in India and China. Then central bank demand tumbled to its lowest level since 2010, cratering 33%.

So gold has struggled through trials and tribulations over the past year. And because anxiety started ramping up in early 2016 – after one of the worst Januarys in market history – year-over-year comparisons are tough.

For example, in February of this year, sales of gold coins from the U.S. Mint dropped to their lowest levels in 14 months. Plus, compared to February 2016, sales were down 67%.

Since the start of the year, gold has found its footing and pushed 8.4% higher. Once again, that’s a pretty solid gain considering that the Fed is expected to raise rates three times this year… And the first could be this month.

Truth is, I don’t foresee gold skyrocketing in 2017. The mood isn’t right for that kind of move right now.

The markets have roared to record highs since November and the results of the election. And psychological thresholds and big round numbers like 20,000 and 21,000 have been torn through.

That said, I expect gold to move higher. As you know, the dollar and the price of gold typically have an inverse relationship. When the dollar is high, gold is low and vice versa. Gold will go higher because there’s a limit to how strong the dollar can get.

And – as we saw after Brexit and the election last year – sentiment can shift overnight.

Every investor should own gold. It’s part of proper asset allocation. And The Oxford Club believes gold should be represented in every portfolio. But remember: Its worth is dictated by fear and uncertainty. And when those spike, the price of gold follows.

Good investing,

Matthew

P.S. If you’re interested in adding gold to your portfolio, seek out a trusted advisor. As an Oxford Club Member, you have access to Pillar One Advisor Asset Strategies International (ASI). ASI, a leader since 1982 in precious metals, foreign currencies and rare tangible assets, helps you Keep What’s Yours through diversification across currencies, countries and investments. For more information, call 301.881.8600 or email moreinfo@assetstrategies.com. Be sure to mention you’re an Oxford Club Member so you get exclusive benefits.