Equities.com: Four Fundamental Reasons to Buy Gold and Silver

October 07, 2019

Article by Andy Hecht in Equities.com

Starting June and through the beginning of September, gold and silver prices were back in bullish mode. Gold rose to its highest price since 2013 and silver to its peak since 2016. The nearby gold futures contract traded up to a high at just under $1560 per ounce. Silver peaked at just under $19.54.

Markets rarely move in a straight line, and corrections can be healthy for bull markets. I believe that any price weakness in the gold and silver markets will turn out to be a buying opportunity. I remain bullish on the two metals that are the world’s oldest forms of currency.

I continue to believe that more gains are on the horizon for the gold and silver markets.

Reason 1: Rates are heading lower

The US Fed has already cut the short-term Fed Funds rate by 50 basis points since July 31. At the same time, the central bank ended its balance sheet normalization program that had been pushing rates higher further out along the yield curve. Concerns over the global economy are likely to keep the downward pressure on US rates. At the end of last week, market consensus continued to favor another two 25 basis point declines in the Fed Funds rate by the end of 2019.

Reason 2: Brexit is a mess

Gold and silver rose to their previous medium-term peaks in July 2016 in the aftermath of the Brexit referendum. Gold traded to $1377.50 and silver to $21.095 per ounce.

The deadline for Brexit is on October 31. The uncertainty surrounding the future of the UK and EU could cause more than a little volatility in markets across all asset classes and is supportive of the prices of precious metals. Gold and silver are safe havens during times of uncertainty.

Falling interest rates in the US, Europe, and around the world makes gold and silver more attractive as stores of wealth compared to fixed-income instruments. The trend in interest rates is bullish for the prices of precious metals.

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