Penn Wealth Publishing

2019.01.13 Penn Wealth Report Vol 7 Issue 01

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14 penn wealth Report volume 7 issue 01 13 Jan 2019 Penn Wealth Report Copyright 2019. All Rights Reserved. investment intelligence In addition to being a non-correlated asset, the table is setting up nicely for a big gold rally in 2019. SPDR® Gold Trust Precious Metals Admittedly, we haven't been big fans of gold as an investment for a number of years. Perhaps it has something to do with all of those clownish commercials featuring a guy in a bad suit standing in front of a green screen video of a giant vault. Had you taken this actor's advice five years ago and put all of your IRA assets in gold, you would now be 2.63% richer. Nonetheless, we do see the table setting up nicely for a big rally in 2019 for this precious metal, first used as a store of value some 2,700 years ago. And our rationale is built on a multi-faceted foundation: fis- cal, monetary, and geopolitical issues are all forming a nice catalyst for gold prices to rise over the next twelve months, perhaps longer. e US dollar has been strong, but we see that changing this year. Increased fiscal restraint by the US (we use that term loosely) and massive quantitative easing by the European Union has helped the dollar gain strength over the past few years. We antici- pate, however, that the Fed is about done hiking interest rates and will slow down on the unwinding of the massive, $4 trillion bal- ance sheet it built up after the financial crisis. Both of those actions will lead to a weaker dollar; and a weakening dollar typically means rising gold prices (see graph). Gold does not like fiscal responsibility. For example, if the United States ever passed a balanced budget amendment stating that the government could not spend more than it takes each year, gold prices would probably plummet. However, with a president who has talked about a $1 trillion infrastructure spend, and the Democrats back in control of the House, does anyone really believe we will have a modicum of fiscal responsibility com- ing from D.C? More than likely, especially as growth slows, the federal debt will continue to grow, the deficit will rise, and budget bat- tles will rage—to gold's benefit. Finally, it is fair to say that gold thrives on chaos. And there is a sense that chaos, both domestically and around the world, will increase in 2019. From ugly battles in D.C., to a hard Brexit, to disruption in the Middle East, expect a troubling year ahead. Also, we can always count on the EU leaders in Brussels to do the wrong thing. Investors will seek a safe haven amongst the carnage, and gold typically serves well in that role. e best vehicle. Forget the jug-head actor in the gold com- mercials: buying physical gold within your IRA account is a stupid idea, plain and sim- ple. Furthermore, buying physical gold at all doesn't make much sense. If a breakdown of society is coming, it would make more sense to have an easier-to-barter currency such as silver (and about a year's supply of MREs). As an investment, either to simply grow in value or to hedge a long equity portfolio, the best bet is to buy into the $33 billion SPDR® Gold Trust (GLD), currently selling for $121/share. GLD's size is simply enormous, meaning it is extremely "tradable" and very liquid. We can even place a stop on GLD in case it quickly turns south for some unforeseen reason (like a sudden wave of responsibility in Washington). If we expect gold to go up in value this year (we do), then GLD is the ideal addition to a portfolio. How much do we expect the precious metal to rise in 2019? We believe it will rise above $1,500 per ounce, which would reflect a 15% jump from here—with the same for GLD shares. Even if the market does rise double-digits this year, 15% is a nice annual return. And, based on recent volatility, the more non-correlated assets we can add to our portfolio the better. e content of this report reflects the personal views, opinions, and research of Penn Wealth Publishing. While measures are taken to help assure the accuracy of data, no guarantees can be made and the firm is not liable for any losses incurred by subscribers. is is not a solicitation to buy. Always consult your investment professional before investing any money.

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