Inflation Cools, Gold Heats Up: Metal Momentum is Building Fast!
What will be the best investment in 2023? The financial press is touting so-called growth stocks right now since they lagged throughout 2022 but are roaring ahead today after a cooler-than-expected Consumer Price Index (CPI) print. Even so, precious metals could be the biggest winners of all, and today’s spikes in gold and silver suggest powerful price moves ahead.
Has inflation “peaked?” Across the board, the financial markets are assuming the answer is “yes” since November’s annualized inflation came in lighter than economists had anticipated. The experts had braced for a 7.3% year-over-year change in CPI, but the actual result was 7.1%.
Other evidence of cooling inflation included November’s core CPI reading, which rose 0.2% month-over-month (versus 0.3% expected) and 6% year-over-year (versus 6.1% expected). So, the stock market’s perma-bulls had reasons to bid up large-cap stock prices this morning.
As you might expect, the NASDAQ roared higher as growth-stock investors breathed a sigh of relief; after all, a high-inflation environment doesn’t favor high-risk assets. As usual, however, the financial media buried the real headline news as gold and silver caught a well-deserved bid in the wake of the soft CPI reading.
Of course, Crush The Street has been bracing for higher gold prices for a while now. Smart-money investors have positioned themselves accordingly, including central bankers throughout the world, because gold was an absolute steal this year at $1,800:
In the third quarter, central banks’ official net gold purchases totaled around 400 tonnes. They clearly didn’t want to store too much of their wealth in U.S. dollars, bonds, or government-backed assets in general.
Central bankers and sophisticated investors were ahead of the curve when they shored up their gold holdings, and don’t be too surprised if mainstream economists suddenly jump aboard the gold train while prices are rising. We’re already hearing the experts at Goldman Sachs and Deutsche Bank praising gold; they’re a little late to the party, but it’s better late than never.
There’s still plenty of room for gold to run, so patience is warranted as the gold price works its way back to the inevitable $2,000 mark. Gold approached a peak of around $2,000 once in 2020 and then again earlier this year. Its all-time high from August 2020 was $2,074.88. Resistance levels are meant to be broken, so expect 2023 to be the year when gold finally leaves $2,000 in the rearview mirror.
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Let’s also not ignore silver because the white metal just zoomed 2.7% higher and landed above $24. Due to its lower price and higher volatility level, it’s not unusual for silver to magnify gold’s gains on days that are generally bullish for precious metals.
Silver has a resistance level of $28 that was established in 2020 and 2021. Then, there’s the longer-term resistance point at around $50 from 2011. If you’re seeking extra potential gains and don’t mind higher volatility, feel free to mix some silver in with your gold holdings.
Given its current trajectory, silver could actually finish the year in the green. There’s no need to get hung up on short-term outcomes and stats, however, as precious metals are meant to be held for years or decades for optimal results.
What would those results be? Growing the value of your portfolio over time is certainly a worthy objective. Anyone who’s held gold and silver since the year 2000 knows how amazing the long-term returns of precious metals can be.
At the same time, a primary goal of holding gold and silver is wealth preservation. Remember that a 7.1% inflation rate is still quite high, and it indicates that the dollar’s purchasing power is deteriorating rapidly even if it’s slower than a few months ago.
So, you can’t blame central bankers, smart-money investors, and wealth preservers for exchanging their dollars for something more solid. There’s really nothing more tangible in the world of investing than gold or silver in your hand. Even while precious metals don’t get massive press coverage, they’ll help you hedge against inflation but still grow your account when inflation backs down.
Chief Editor, CrushTheStreet.com
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