There's plenty of reasons to be bullish on gold.
The technical set-up on the monthly gold chart reveals that the metal could be in the very early stages of a significant new bull run.
Gold bulls see a major gold target at $1,795 an ounce. Jump on board now, this market is going higher.
Here are 5 reasons gold could climb sharply higher in 2019
1. New International Banking Regulations Classification for Gold
In early April, the Bank of International Settlements (BIS) issued new regulations for banks around the globe. Tucked inside a lot of fine print, was significant language that signals how banks can now rely on the safety and security of physical gold, just like you do. The so-called Basel regulations used to define gold as a 'risky' asset or 'Tier 3' holding.
Now, that has all changed.
This spring, the BIS changed its classification for gold, essentially stating that a 0% risk weight will be assigned to bank holdings stored in gold bullion. That's a big upgrade for gold's official role in the international banking system.
Don't be surprised if you see more international banks moving toward holding gold, which has no counter-party risk and has no government obligations (such as massive government debts and deficits that can erode paper money's value).
2. Lower Central Bank Rates
At its June meeting this week, the Federal Reserve hinted that an interest rate cut could be right around the corner. It removed the word "patient" from its post-meeting statement and the said it will "closely monitor" the economy amid a growing list of uncertainties. Europe is hinting at a possible interest rate cut too. That's very bullish for gold.
Despite expectations that the Fed would "normalize" interest rate policy in 2019 and 2020 with higher rates, political considerations and concerns over the trade war are trumping traditional monetary policy actions. Instead, the Fed is revealing that the country is in a sense hooked on easy monetary policies which, at the end of the day, simply erode the value of paper money.
3. Central Banks Are Buying Huge Amounts of Gold
Central bank bought 145.5 metric tons of gold in the first quarter. This central bank gold buying was the strongest first quarter in 6 years.
The strong central bank gold buying seen in the first quarter of 2019 follows a 50-year high in purchases last year. The relentless gold buying spree continues.
Governments and central banks around the world buy gold for the same reason that individuals do – wealth preservation, portfolio diversification, a liquidity source, a hedge against currency devaluation and the list goes on. Don't expect them to slow down their sales anytime soon. Central bank purchases are a strong buy signal for gold.
4. Trade War
Economists continue to warn that the bitter U.S.-China trade war could drive the world's two largest economies into recession.
Could it happen? Unless you have a crystal ball, nobody knows. Investors are hanging their hopes on a G20 summit later this month where President Trump is expected to meet Chinese President Xi Jinping. Stay tuned if concessions emerge. If not, it could support a new up leg in gold.
5. Billionaires Are Buying Gold
Gold has long been a favorite of billionaire investors. Guess what? They are betting on gold right now.
"I am certainly long gold,” DoubleLine CEO Jeffrey Gundlach and billionaire, said in an investor webcast this month.
Billionaire investor Paul Tudor Jones told Bloomberg this month that his favorite pick in the next 12–24 months is gold. He thinks that if gold hits $1,400 per ounce, it will quickly move to $1,700.
Guess what, we are just about at $1,400 an ounce right now.
The Bottom Line
Gold is climbing and there are many catalysts that could send the precious metal sharply higher by the end of the year. If you've been considering adding gold to your portfolio, don't wait. Now's the time to snap up a bargain while you still can.
