September 2020 - Week 4 Edition
“Panic” Gold Buying in Turkey is a Typical Reaction to a Collapsing Currency
Gold has been rising when the dollar falls and falling a bit when it rises, but when the dollar begins to fall farther and faster, you can expect a strong rush to gold, as has been happening in Turkey and – to a lesser extent – in countries like Russia and Argentina, where their currency is chronically weak. The Wall Street Journal wrote about this last week in an article entitled, “In Turkey, Weak Lira Powers Fresh Gold Rush: Turkish households bought record volumes of gold this summer – and safe boxes to keep it at home.”
The Journal describes long lines in front of gold outlets since June. “I’ve been at the Bazaar for 20 years and I never experienced that,” said Ozgur Anik, general manager of Ozak Precious Metals. “When gold prices are at record highs, people normally sell their gold. This time, they kept buying more.” The average daily volume of gold sold at the Bazaar shot up 10-fold, to 4,500 pounds from 450 pounds, Mr. Anik said.
Gold is a form of long-term savings in Turkey and most people keep their gold savings at home, but some are now buying gold as a speculation. “I’ve been chatting with hundreds of people who are thinking about selling their cars or houses to invest in gold,” said Gunay Gunes, operator of a busy gold booth in the Bazaar. Due to rising demand, Turkey has had to import more gold this summer. From January to August, Turkey imported $15 billion in gold, up 153% from a year ago, according to the Turkish Trade Ministry.
With negative interest rates throughout the world and collapsing currencies, you can expect this gold-buying mania in Turkey to be repeated throughout more countries.
Gold fell below $1,900 Monday, September 21, but quickly recovered. Before noon, gold fell from almost $1,950 to almost $1,880 but rose back to the midpoint, $1,915, by the close. At its low, gold fell to its lowest point in two weeks as the dollar rose about 0.4%, but the yellow metal showed its resilience by bouncing back quickly. There is little doubt that the level of uncertainty remains high and will continue to grow as the November election approaches, especially with the turmoil likely to surround any attempt by President Donald J. Trump to nominate a Supreme Court Justice to replace the late Ruth Bader Ginsburg possibly before the election.
Here’s Another $5,000 Gold Price Prediction
Now that gold prices have set a new high, we have seen more price predictions above $3,000 per ounce. This week, I noticed that the same person who once bet my friend Gary Alexander that gold would fall below $1,000 in 2017 – and later predicted gold would go above $3,000 – has now predicted $5,000 gold.
In this week’s edition of his “Global Mail” column for Navellier & Associates, Ivan Martchev wrote, “I do not necessarily have any targets for the price of gold and silver bullion, other than to say that the last time gold bullion took out its all-time high of $850, it more than doubled that number, to over $1,900. We just took out that previous high, so we could more than double it again. That could put gold bullion in the vicinity of $5,000 per ounce by the time the latest bull run is over. That puts silver bullion with a triple-digit target. It’s hard to say when that would happen, but it is likely to be in the next five to 10 years.”
However, it could happen sooner: “In the previous bull run (2001-2011), we did not have the stated goal of the central bank to create higher inflation, so this time the whole move would presumably happen faster.”
Last week, I chronicled some of the other major mainstream investment advisory services that are now predicting gold prices of $3,000 to $5,000 in the next 2-3 years. Just for a reminder, they included:
Gold may give up some of its recent gains, but a rise to $3,000 next year is highly likely.
America’s Gold Expert® Says Invest 25% of Your IRA or 401(k) in Gold and Silver – Here’s How
Now that many leading mainstream banks have raised their gold price target and have recommended a significant portion of one’s portfolio be in gold, it’s time to make sure that your regular portfolio and your retirement portfolio are properly balanced in precious metals. After all, as the Bank of America said when it raised its target price of gold to $3,000, “The Fed Can’t Print Gold.”
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