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Summary

  • Gold is slumping to end the summer.
  • We still like gold (and silver) as hedges versus global turmoil and currency inflation.
  • We believe pricing could rise back to 1400/oz to end this year.

Because of our current outlook on the economic climate, we've been keeping a close eye on how gold has performed throughout 2014. We're convinced that when we get our coming correction (which we believe will start with the Fed's rate hike) that gold will likely be a refugee point for equity investors.

We estimate that we could see gold back near 1400/oz to end this year, levels that it was nearly at in March of this year on its run.

As you can see below, gold spiked to end the winter near mid-March, but since then has pulled back, at one point touching as low as under 1250/oz.

(click to enlarge - source Kitco.com)

There were a couple of notes out this morning pointing out that gold was nearing its lowest levels since the middle of summer, however, we attribute that to the strength in the dollar.

(click to enlarge - source)

The way that gold moves inversely to the strength of the USD seems to be putting undue pressure on the metal, as we feel like regardless of the dollar's strength, it's a losing battle the paper currency is fighting in the long run. Ergo, gold is a good bet for someone thinking 5-10 years out.

We also watched pricing of the commodity deflate after the minutes from the Federal Reserve's latest meeting showed that they were potentially thinking about raising rates sooner. Again, we believe just the opposite should have occurred, and gold should have walked up on these sentiments as equities are likely to be negatively affected from a rate hike.

The Peel's Feel:

In addition, we also like silver here. Like aluminum, silver has significant avenues for usage outside of simply being a commodity that people hold. Silver is also being pressured downward towards its lows of the year.

(click to enlarge)

With the geopolitical tensions overseas, we still think gold is a prim and proper hedge for investors. Traditionally, on a global scale, gold has had the most success in holding its value during times of turmoil throughout the world.

There is also the extremely important argument of whether or not banks are moving away from the USD as a reserve currency and buying gold instead, as explored in this nice read by Profit Confidential.

With gold at its support near $1,275, we are considering a position in the commodity as a hedge for the next couple of years.

Source: Strength In Dollar Makes Gold An Opportunity