David Morgan Buy Precious Metals Now
Still, it’s worth noting the failure of other widely cited factors to account for gold’s recent short-term weakness. Take inflation, since gold is widely considered to be an inflation hedge. In contrast to the Consumer Price Index’s 2.1% increase in 2017, its rate of increase over the last 12 months is 2.9%. Other things equal, therefore, one would have thought that gold would have increased this year — not fallen significantly.
Or take geopolitical risks, since gold is widely thought to be a hedge against geopolitical uncertainty. At least according to an index of such uncertainty that has been constructed by two economists at the Federal Reserve, however, geopolitical risk today is slightly higher than it was last year. So, to the extent gold hedges such uncertainty, you’d expect gold to be higher today than earlier this year.
The bottom line: Contrarians won’t trigger a buy signal until the gold timers on balance become much more discouraged.