Buying gold is a good idea in 2018 for investors not only looking to protect their wealth, but to also grow it.
According to Money Morning Resource Specialist Peter Krauth, the price of gold will rally significantly next year. He expects gold prices to hit $1,350 by late February 2018. But it's nothing compared to his 2020 gold price target.
Everyone knows that gold is an excellent hedge during times of uncertainty and political turmoil.
Events like North Korea's recent missile testing and the continuing controversies in Washington drove the price of gold from $1,150 to as high as $1,350 in September of this year.
Since then, gold has fallen back down to $1,273, as Bitcoin-mania gripped markets. But Bitcoin's 32% tumble in the second half of December reinforces the case for why Bitcoin is not at all a hedge like gold.
However, gold is well below its historical highs of $1,800 in 2011. And according to Krauth, both Bitcoin and the Federal Reserve have brought us a gold bottom.
Today, we'll show you the three reasons we're raising our gold price forecast. Plus, we'll explain whether it's better for you to buy physical gold, gold stocks, or gold ETFs...
According to Krauth, inflation will be a major boon for gold prices in 2018.
The current 1.6% inflation rate is its second-highest level in the last five years. That number is expected to move even higher as the stock market keeps reaching higher highs, says Krauth.
Inflation is the rate at which the price of general goods and services rises and the purchasing power of the dollar decreases.
Urgent: Executive Editor Bill Patalon just saw something on his precious metals charts he's only seen twice in 20 years. He calls it the "Halley's Comet of investing" - and it could lead to windfall profits. Read more...
That's why the Fed manages inflation by raising interest rates. This has kept inflation from getting out of control as the stock market rises.
But there's been a growing sense of uncertainty among investors as the stock market keeps hitting records. Rising inflation often convinces people the economy is growing unstable, which can cause investors to exit the stock market.
Since assets like gold are considered safe havens during times of economic uncertainty, gold prices will rise as people protect themselves.
And that's only the first reason we're raising our gold price forecast...
Reduced short-selling in the gold market also indicates the price of gold will rise over the next three years.
Over the last year, the number of short positions on gold stocks has fallen. One indicator of short interest is the Gold BUGS Short Index (NYSE: HUISH). This index tracks short-selling on mining firms that specifically refuse to cut gold production based on gold price movements. In the last 12 months, HUISH has dropped 6.24%, indicating short interest in the broad gold sector is falling. This shows a shift in sentiment from bearish to bullish for gold.
Canadian gold mining company NovaGold Resources Inc. (NYSE: NG) shows an even starker change in sentiment. In the last 12 months, the volume of short bets on the stock declined 79%, to 522,400.
But wait till you see this next shocking trend, which predicts when gold prices will rise...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Since 1986, Fed interest rate increases have been followed by strong gold gains.
Before the rate increases, you'll see gold prices skid. But then, after the actual rate increase, they'll rally. This is supported by 30 years of data.
And this trend is happening again right now. The Fed's September meeting showed an interest rate hike wouldn't be likely until December. And gold prices peaked this year at $1,348.80 on Sept. 8, before falling to $1,240.
When the Fed raised interest rates for the third time in 2017, on Dec. 12, the price of gold shot up from $1,240 to $1,273 today (Dec. 22).
It's expected that rates will continue rising next year, when Jerome Powell starts as chair of the Fed. If gold prices behave like they have for the past 30 years, then they should continue rallying in step with further rate increases.
Now that we've run through the three reasons why gold prices will increase in 2018, here's whether you should invest in physical gold, gold stocks, or gold ETFs...
If you mainly want to invest in gold to hedge against uncertainty and political turmoil, buy physical gold. If you're interested in collecting coins and rare substances, buy physical gold.
But before you buy physical gold, you must consider whether you can safely store your gold either in a safe or a bank safety deposit box.
On the other hand, if you primarily want to invest in gold to profit from its price rally in 2018, investing in gold stocks and ETFs might be best for you. One of our favorite gold stocks is Goldcorp Inc. (NYSE: GG), the biggest gold company in the world.
Our favorite gold ETF is the Gold SPDR (NYSE ARCA: GLD). It gives investors the best way to benefit from rising gold prices without the expense of managing physical gold.
Money Morning Executive Editor Bill Patalon just caught something on his gold charts that he's only seen twice in the past 20 years. A $13 billion gold anomaly he calls the "Halley's Comet of investing."
It's very rare, and fleeting, and Bill sees things lining up perfectly to bring some very sizeable precious metal profits to well-positioned investors.
Click here to check out his research...
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