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Safe-Haven Gold: Time To Take Profit Or Add To Your Portfolio?

By Investing.com (Haris Anwar/Investing.com)CommoditiesSep 20, 2019 01:57PM ET
www.investing.com/analysis/safehaven-gold-time-to-take-profit-or-add-to-your-portfolio-200466431
Safe-Haven Gold: Time To Take Profit Or Add To Your Portfolio?
By Investing.com (Haris Anwar/Investing.com)   |  Sep 20, 2019 01:57PM ET
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Investing in gold is a pure bet on the economy. The precious metal hit a six-year high this month as central banks globally eased their monetary policy to deal with the slowdown in growth triggered by the U.S.-China trade war.

The events of the past six months have supported a bull run in gold, which is considered a safe-haven asset during times of economic turbulence. The U.S. and China trade dispute escalated, the European economy slowed, Brexit became ever messier and tension in the Middle East flared up after the attacks on the largest oil-producing nation, Saudi Arabia.

Gold Futures
Gold Futures

These macro setbacks raised the possibility of a recession and forced the U.S. Federal Reserve to start cutting interest rates. On Sept. 18, the Fed acted again and lowered the borrowing cost by another quarter of a percentage point, to a range of 1.75% to 2%.

Encouraged by these signals, gold bulls moved their cash to gold and silver miners, sparking a rally in mining stocks. BlackRock's iShares MSCI Global Gold Miners (NASDAQ:RING), has returned almost 14% in August, more than any other unleveraged stock fund in the U.S., data compiled by Bloomberg show.

XAU/USD
XAU/USD

Gold at a Record High?

Going forward, however, the big question for investors in gold assets is whether this rally has legs, or we are at the peak of this bullish trend. According to a recent note by Citigroup’s analysts, the outlook for gold is quite healthy as they see a possibility of prices rallying to a record above $2,000 an ounce in the next two years.

That rally, according to analysts including Aakash Doshi will be supported by drivers such as the rising risk of a global recession and the likelihood that the Federal Reserve will reduce U.S. interest rates to zero.

“We expect spot gold prices to trade stronger for longer, possibly breaching $2,000 an ounce and posting new cyclical highs at some point in the next year or two,” they said. If that level was reached, it would exceed the record of $1,921.17 set in 2011.

But the risks to this bullish scenario are equally strong. Both U.S. and China are back at the negotiation table in October and the markets are returning to normal on hopes of a resolution to their dispute.

On the economic front, the U.S. economy is still showing signs of strength, helped by robust consumer spending, and strong job creation. That was the main reason why the Fed failed to signal that more cuts were coming. FOMC officials are divided over whether more cuts will be needed, with some of them thinking Wednesday’s change was itself a cut too far.

Gold Stocks to Buy

In this highly uncertain economic environment, it’s probably not a bad idea to keep some exposure to gold in your portfolio. If the gold rally is sustained and prices continue to climb higher, gold miners who have taken steps to cut costs and capital expenditures over the past few years stand to benefit the most, making them an attractive alternative in any long-term portfolio.

In this group, we like Newmont Goldcorp (NYSE:NEM), now the world’s largest gold miner, and the Canadian producer Barrick Gold (NYSE:GOLD). These are among the producers who learned a hard lesson during the metal’s last bull surge.

Newmont Goldcorp/Barrick Gold price charts
Newmont Goldcorp/Barrick Gold price charts

Prices in the spot market reached a record $1,921.17 in 2011, but the rally collapsed quickly as historically low interest rates and quantitative easing by central banks fueled gains in the equity market and economic growth accelerated. By the end of 2015, prices had tumbled about 45%.

Now that bullion is back in favor, many miners are playing it safe by going for organic growth and optimizing existing assets. They've gone through sustained cost cutting, debt reduction and boosts in productivity after the last slump to lure back investors.

The shares of Newmont, at $39.30, are up about 14% this year, while Barrick Gold had surged 38% to $18.17.

Bottom Line

Investing in gold-linked stocks, such as BlackRock’s Gold Miners ETF (NYSE:GDX) or top gold miners, is a risky proposition due to many opposing dynamics that could push the precious metal in either direction. That being said, gold’s haven status is intact and it can provide a great hedge when other assets are plunging. In the current uncertain economic environment, the precious metal offers a prudent way to diversify your risk and add some safety to your portfolio.

Safe-Haven Gold: Time To Take Profit Or Add To Your Portfolio?
 
Safe-Haven Gold: Time To Take Profit Or Add To Your Portfolio?

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Kamal Khatri
Kamal Khatri Sep 21, 2019 8:58PM ET
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As lomg as its closes above 1487 on a weekly basis it stays afloat. Below that it opens an more meaningful correction. On updisde sept high beeds to break for next leg up
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 8:58PM ET
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you are right on 1487 ...
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 11:46AM ET
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gold was going down to 1000 from 1250 but trump tariff madness drove gold to 1560. trump gets mental checkup soon. gold will go back down
dustin johnson
dustin johnson Sep 21, 2019 11:46AM ET
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you should seek help. you seem lonely and misguided. you posted on this article like 7 times! seems like a cry for help.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 11:46AM ET
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dustin johnsonyes 7 times to ensure the ignoramuses get it right in time. ha ha ha
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 11:45AM ET
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gold was going towards 1000 to 800 from 1200, but this crazy trumpie did his crazy tariff stupidity driving uncertainty and gold shot up from 1200 to 1560.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 11:41AM ET
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rates will rise gold will be down . nothing to worry
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 11:39AM ET
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gold peaked at 1560 . gold will go to 1000 in 6 months or more
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 11:38AM ET
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Joe biden is not a socialist at least not as much as Obama was
Brady Murray
Brady Murray Sep 21, 2019 11:02AM ET
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I am long gold. GLD. Gold will move higher leading the 2020 elections due to risk that Trump loses. Any hint of a socialist dem winning will cause gold to soar due to impending economic disaster with a dem win.
Mik PM
Mik PM Sep 21, 2019 10:37AM ET
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will go back to fibo 618. 1430 ish. will reload there. ubtil then, stockmarket is the wat to go imo
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 10:37AM ET
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Fibonacci 72 and then swoon
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 21, 2019 2:57AM ET
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there will be people who will have to sell their gold to buy food, unless they know how to live on eating gold. many people will lose sources of income ... because of layoffs due to lower profit margins and automation.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 20, 2019 4:56PM ET
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your job and paycheck will be the only safe haven. good luck
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 20, 2019 4:55PM ET
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even as us dollar will fall
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 20, 2019 4:53PM ET
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may be 600
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 20, 2019 4:53PM ET
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gold will be 1000 in 1 to 2 years
Edward Chong
Edward Chong Sep 20, 2019 4:53PM ET
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u must have lost a lot trading gold futures. i pity u.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 20, 2019 4:53PM ET
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Edward ChongI pity you can't think properly ha ha ha
M.A Tamas
M.A Tamas Sep 20, 2019 3:53PM ET
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1521 is the next major catch point.
viral Loladiya
viral Loladiya Sep 20, 2019 3:32PM ET
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Gold sell?
Matthew Mataruse
Matthew Mataruse Sep 20, 2019 3:32PM ET
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no, i can see it closing weekly bull by friday next week
K Tv Murad
K Tv Murad Sep 20, 2019 6:32AM ET
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Any down side numbers?
Max Chan
Max Chan Sep 20, 2019 3:53AM ET
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Gold is not a pure bet against the economy as it is also affected by interest rates decisions. Copper would be a pure bet
Andrew carson
Andrew carson Sep 20, 2019 3:53AM ET
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Cooper would be a buy at the end of a recession not at the beginning of one.
Willermo Dolo
Chucky Sep 20, 2019 3:53AM ET
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lol copper... insanely amazing stewpid comment
 
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