There appear to be two main factors hurting equities right now: headlines about a potential trade war brewing between the U.S. and China and the Federal Reserve going ahead with rate hikes as planned. As for the U.S.-China situation, no tariffs have yet to actually be implemented, but both governments have gone public with imports that would be targeted. The Trump administration is taking a hard line on steel while China has said it would target agricultural imports like soybeans. This follows the U.S. move earlier in the year to stick tariffs on Chinese-made solar panels. There also fresh rumors that the Chinese government is considering devaluing the yuan, a sore point with the U.S.
What does all this mean for investors? Equities investors are shaken by the news. Tariffs could have far-reaching consequences including poor performance in many sectors and job losses. Meanwhile, the Federal Reserve’s promise to hike its rates throughout 2018 would ordinarily be bad for gold according to many, but that negative relationship has changed in recent years. It may be because very wealthy speculators go long on the dollar and short on gold in anticipation of a rate hike. After the hike comes into effect, they sell dollars and buy gold to set their gains in stone.
Some analysts predict that a gold rally that took prices past $1,365 per ounce would spell real trouble for equities investors. Such a rally would be a sign that the market is losing confidence in stocks, signaling a move toward safe haven assets like gold. As markets have seen in the past, once gold gains momentum, there’s no telling where it will stop.
But gold bullion hasn’t seen much volatility, which usually follows panic-moves. A more likely scenario is that many investors are getting ready for a dramatic downswing in the market by moving money gradually into gold. They’re buying insurance and if you’re heavily invested in equities, you probably should, too.
Gold is a buffer for drops in equities and it’s better to come prepared. Holding physical gold bullion is also a better option than ETFs or mining stocks, as these come with the risks of company management. According to Shark Tank star Kevin O’Leary, gold mining companies have a history of poor cost control that hampers their stock prices more than gold itself. To buy gold bullion, investors can easily head to online dealers like Silver Gold Bull. Online gold dealers offer large inventories of gold coins and bars at low prices. If you’re a serious investor, you should have no problem qualifying for free shipping from Silver Gold Bull. Alternatively, you can look into storage solutions from a gold dealer. Allocated storage offered by Silver Gold Bull offers better protection from theft and fraud than either your home safe or the bank. That’s because banks don’t keep your gold separate from other depositors’.
Money is already shifting into gold in preparation for a market downturn. Be ready for the moment markets move and buy gold now.