Is the price of gold going up in 2017? So far, the answer is yes - and we think prices will rally even higher in the months ahead.
Since the beginning of the year, gold prices have climbed 7.1% to their current per ounce price of $1,233.70. That beats the Dow Jones Industrial Average's gain of 6.5% over the same period.
However, the stock market consistently hitting new all-time highs has investors growing more bearish on gold prices in 2017. According to Commitments of Traders reports, the number of short bets on gold futures climbed 36.7% from 455,619 on Jan. 24 to 622,668 on Feb. 21. That increase indicates traders are becoming less confident that the gold price will rise this year.
But Money Morning Resource Specialist Peter Krauth remains bullish. In fact, he sees gold rising 13.5% to $1,400 an ounce later this year.
Here's the one reason why he's so confident in that prediction...
Is the Price of Gold Going Up This Year? Yes - for One Big Reason
The biggest reason why gold prices are going up in 2017 is rising inflation. This will keep climbing thanks to the surging stock market and increasing bond yields.
The inflation rate measures how much the prices of goods and services across the whole economy are rising. Since a soaring Dow Jones Industrial Average comes from soaring stock prices, inflation fundamentally arises from a market rally.
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But the bad thing is that explosive market growth reduces the U.S. dollar's purchasing power. That results in lower spending, which generally hurts the economy.
The U.S. Federal Reserve keeps inflation in check by managing interest rates. If inflation is rising, the Fed will raise rates, which it did last December. But that rate hike did not keep the Dow Jones from hitting 21,000 for the first time ever on March 1 on the back of Trump's proposed tax cuts.
The stock market's unprecedented rally has also pushed bond yields higher. The Dow Jones' 0.9% gain over the last week alone has sent the 10-year Treasury yield up from 2.31% to 2.5%. High bond yields often indicate high inflation, and the latest January data shows inflation at 2.5%. That marks the sixth straight monthly increase and is also the highest rate since March 2012.
Since demand for safe havens like gold rise when the dollar is volatile, gold prices will rise as people protect themselves. This will coincide with a similar spike in demand for gold stocks.
The best gold stocks to buy right now are gold miners. These companies will benefit the most from rising gold prices because that will incentivize them to boost output, resulting in bigger profits.
That's why we're recommending these two gold stocks, which are expected to skyrocket 86.3% and 62.1% by March 2018...
2 Gold Stocks to Buy for 86.3% and 62.1% Returns
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The first gold stock to buy in 2017 is a top recommendation of Money Morning Executive Editor Bill Patalon - Goldcorp Inc. (NYSE: GG).
Last year, GG's share-price performance was below other gold miners. It rose 12% in 2016, less than Agnico Eagle Mines Ltd. (NYSE: AEM) and Newmont Mining Corp. (NYSE: NEM). Those two firms soared 54% and nearly 84%, respectively.
But GG stock could see a massive 86.3% rally to $28 in the next 12 months as the company plans to hike its long-term gold production by 20%. The more it produces, the more money it will make, especially as gold prices climb.
Patalon points out that Goldcorp is among the best-managed companies in the gold mining sector. Because of its good management, he expects the company to be a major beneficiary of a rally in gold prices. It also boasts a low all-in sustaining cost, which measures how much it costs a company to produce one ounce of gold. Right now, Goldcorp's AISC is $812. If we consider the current gold price of $1,233.70, the firm theoretically makes a $421.70 profit on each ounce produced.
Yesterday (March 2), GG closed at $15.03. A Yahoo Finance survey of Wall Street analysts gave Goldcorp stock a high one-year price target of $28. That would be a whopping 86.3% return from the current price.
The second top gold stock of 2017 is Barrick Gold Corp. (NYSE: ABX). Barrick is the world's biggest gold producer, with a $21 billion market cap and operations spanning five continents.
Barrick also has a very low AISC of $760. Considering the current gold price, the company makes $473.70 on each ounce sold. And, of course, that profit margin will increase as gold rises toward $1,400 per ounce.
ABX stock is having a stellar year so far. It has risen 12.6% to $18.04. The same survey of Wall Street analysts gives Barrick stock a one-year target of $29.25 per share. That's up 62.1% from the current price.
With these incredibly bullish price predictions, Goldcorp and Barrick are poised to become two of the best gold investments of 2017.
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