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With the Dow, Nasdaq, and S&P 500 trading at or near all-time highs, gold might be the last thing that comes to your mind as far as a profit opportunity. After all, people really only think of buying gold when the markets are tanking.
But that's actually too late.
In fact, your best opportunity to buy gold is right now.
Two Reasons to Buy Gold Right Now
I believe the markets will continue to make new highs… for now. But the way I see things, the stock market is one negative catalyst away from a pullback. And that negative catalyst could very likely be the growing fear of inflation.
Inflation is the general increase in prices and decrease in purchasing power (which basically means you pay more for the same goods and services). The inflation rate is a measure of how much prices increase. And it's especially concerning when equity prices are rising too high, too fast (called a rally) – which is what many analysts and economists believe to be happening right now.
As you've seen, this has been an extensive rally since Election Day, in particular. While this has been great news for the markets (as well as you and me), the concern is that it may actually be too much of a good thing. This is the type of growth that may end up stifling the purchasing power of the U.S. dollar.
In fact, Janet Yellen has already said this year that inflation may rise above its core target rate of 2%. And if that happens, you're looking at the possibility of a 5% to 10% pullback in the markets.
2. Rising Prices
Between 2000 and 2012, gold's gone up in value an average of 15% per year, which you can see in the chart below:
Over the same period of time, the S&P 500 has gone up a cumulative 15%. That means gold has done, on average, what the S&P 500 has taken over a decade to do. And just yesterday, gold recorded its fifth and longest consecutive monthly price increase (to $1,258.92) since May 2010. It's also gained about 10% already this year.
Now, gold may have come down a bit since its steady incline between 2000 and 2012, but any type of a sell-off in equities to the tune of 5% to 10% could result in the rotation of capital out of equities and back into gold – which can easily happen as inflation and correction concerns continue to grow. So you're looking at the perfect storm for gold to keep driving higher by the end of the year.
What this all means is… the time to buy gold is now.
And soon, I'll show you how exactly how.
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About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.