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| By Sean Brodrick |
We already hit my first target. So, if you haven’t yet, you need to get in before we ride higher to my second.
You probably know that gold keeps closing at record highs, recently over $3,150 an ounce. The yellow metal just posted its best quarter since 1986!
Why? Because traders, investors, funds and central banks alike are on the knife’s edge as President Trump slaps sky-high tariffs on our trading partners.
Central banks are buying gold by the boatload. Traders are loading up on gold amid the rising trade, currency and geopolitical uncertainties.
Speaking of currencies, guess how the U.S. dollar is doing? I’ve explained how gold and the greenback sit on opposite ends of what I call “the seesaw of pain.” As one goes up, the other goes down.
When you jam a tariff-shaped wrench in the gears of your economy, money starts leaving, and that means less demand for dollars.
Result: Q1 saw the U.S. dollar trade lower against ALL major peers, including gold.
The dollar fell 2.7% in Q1, a massive reverse from its 7% gain in Q4 of last year.
SEK is the Swedish krona. NOK is the Norwegian krone. Even these currency leaders lost to gold, the ultimate safe haven, in Q1.
Many on Wall Street think this will stop when the tariffs are in place. But sorting out the tariffs’ final form could take weeks … or months!
Until then, I’d expect plenty of uncertainty in the market. And I know a golden cure for that!
Heck, I added the iShares Gold Trust (IAU) to Resource Trader a month ago, and it’s already showing double-digit percentage gains. Is it going higher? BANK on it!
You know who agrees with me? Goldman Sachs just raised its year-end price on gold to $3,300 an ounce. Bank of America raised its target to $3,500 an ounce.
You know what? The white-shoe crowd just doesn’t get it! Their price targets on gold are Way. Too. Low!
I’ve made the case multiple times why my targets for gold were $3,100 by mid-2025 and $6,900 longer-term.
Here’s an article from January, and here’s one from October of 2024!
We hit my first target a little early. But then, I wasn’t expecting tariffs of this scope or size.
Wall Street also underestimates the damage tariffs can cause.
The last time America did hefty tariffs was back in 1930. Imports were then 3% of GDP, according to St. Louis Fed data.
Today, imports are 15% of GDP. That means the economy has five times the exposure to tariffs today than nearly a hundred years ago when we learned how tariffs can hobble an economy.
Look, tariffs could be good for America’s economy in the long term. I don’t have a crystal ball.
But it appears many investors are deciding that if we’re heading for a tariff-induced rough patch in the short term, they want to own fewer stocks and more gold.
And what about inflation? I have some data from the Dallas Fed on that …
The prices paid component in the Dallas Fed Manufacturing Index rose in March to its highest level since July 2022.
This is in anticipation of higher costs of imported goods. It sure looks like even anticipation of tariffs can push up prices.
More news out of Dallas: The six-month outlook component of the Dallas Fed Manufacturing Index slid by 42.1 points over the past two months. The only other time there was a larger move to the downside was during the depths of the pandemic.
So, prices are going up, and economic activity is slowing down.
Interestingly, Goldman Sachs just raised its odds for a U.S. recession to 35%. But let’s not think about that. Let’s go with a slowdown scenario.
When the economy slows, the Fed usually cuts rates to prop up slowing growth. More rate cuts could be the thing that kicks the gold advance into higher gear.
How To Play It
I mentioned the iShares Gold Trust (IAU) earlier. It holds a basket of gold, so it’s on a relentless bull run with the metal.
It also has a “B-” from Weiss Ratings and an expense ratio of 0.25% (cheap).
If you have the patience, wait for the next pullback. Gold and the IAU experience regular pullbacks because nothing goes in a straight line.
I’ve indicated four of those pullbacks on this weekly IAU chart, including the last one I recommended Resource Trader members buy. It’s an easy way to ride the gold rally.
I firmly believe gold will more than double from here. It will take a few years, but we’ll get there. What a sweet ride that will be!
The bottom line is that if America’s economy is going through a rough patch, it’s nice to have a golden cushion.
All the best,
Sean
P.S. In addition to gold, I also recommended you add some defensive income to your portfolio a month ago through a high-dividend ETF.
But did you know there’s a way to do both? Get in on gold’s rally, while boosting your income?
Yesterday, my colleague, Nilus Mattive, unveiled his 60-Second Income strategy. It does even better in volatile markets like we’re seeing. Check it out while you still can.
