When it comes to managing investments, risk management is everything. Knowing the potential risk on any position is imperative to success. Risk is not always to the downside, however, and oftentimes markets will exhibit behavior that warrants upside risk. The gold market may currently be displaying such upside risk.
After spending much of 2018 probing the recent lows, the selling pressure eventually began to run dry. Try and try as they might, the bears were simply unable to push prices to significant new lows. In effect, this simply means that buyers were willing to step in and buy at those levels. For the long-term investor, those levels could be viewed as having significant value.
The market has since begun to climb higher. Gold has already breached one key resistance level while currently eyeing another. As prices move higher, what investors consider to be a good value may rise as well. The market has several key issues working in its favor that could keep prices on the offensive.
What may be keeping risk to the upside at this point?
- Stock declines and market volatility: Stocks indexes have been toying with entering bear market territory, and many individual names already have. Despite some recent gains in equities, the risk of a significant bear market is very real. In fact, the recent rally may be nothing more than a dead-cat bounce before stocks roll over again.
- Rising recession risk: The risk of recession appears to be on the rise. Slower growth in China as well as weakness in U.S. manufacturing point to a major global slowdown. The economy has been growing steadily for years now and with employment already considered “full,” there may not be much, if any, upside left.
- An increasingly dovish Fed: After planting expectations of three rate hikes this year, the Fed has backed off. While another rate hike could be in the cards, market expectations are for no further hikes this year. Fed chief Jerome Powell even recently suggested that the central bank would remain flexible. The Fed may not only become far more passive, but it could potentially even have to lower rates this year.
- Geopolitical risks: Where to begin? The ongoing war over trade with China is clearly impacting the world’s two largest economies. While there has been some recent optimism that a deal can be reached, the two sides appear to be far apart and these issues may take considerable time and flexibility on both sides to resolve. The democrats have also now taken control of the House of Representatives, which could potentially halt the Trump administration’s agenda in its tracks. To be sure, U.S. politics could be a major market wildcard in the months ahead.
Although the gold market has already begun its ascent, it is not too late to get involved. This asset class not only has tremendous upside potential from current levels but may also act as an important hedge against rising inflation, a weaker dollar and the risk of recession.
Adding gold to your portfolio has never been easier. Simply pick up the phone and speak with an Advantage Gold account executive today about the potential benefits that gold may offer. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation in this key asset class using your IRA account.
Don’t wait for the next major wave of stock selling or for the next recession to set in before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, china, Fed, gold, market collapse, market expectations, market volatility, recession risk