Gold is shining

Gold is shining

Today, January 18th 2016, is Martin Luther King Day in the US, meaning the stock market is closed for the holiday. While some may think this day is fruitless, it is in fact an opportunity. This is the best time to invest in commodities such as oil and silver, and in this case, let's talk about gold.

Gold is what's known as a "safe haven" commodity. There are several reasons for this. Essentially it means that when the market is highly volatile or filled with uncertainty, gold is considered a safer trading route. It is not an asset where we can expect any major or sharp swings. Another reason for Gold's haven status is the lack of dividends or interest. Finally, gold's prices are easier to predict because at the core they work on a basic supply and demand formula. Many might be doubting the shiny metal due to its fairly weak performance in 2015, but predictions and market conditions show us we shouldn't count it out for 2016.

The global economy is facing an uphill battle at the moment, primarily resulting from China and Europe's economies being on the verge of collapse. Along with this, the US's economy is in good health, which means that interest will be rising. All of these factors together mean that many investors will be scared away from stocks for the time being, and in such times will turn to gold.

We talked about supply and demand, which we should pay attention to here. Quite simply, there is more demand for gold at the moment than supply. One of the reasons for this is that a significant percentage of bullion has been bought by several Central Banks in the past few years and they are not selling. In addition, with gold as with everything else, we can turn to our good old adage – trend is our friend, and trends are giving us a few hints. For example, the gold-to-silver ratio is currently at 75. Twice before we've seen it hit this level (in 2008 and 2003) and twice before we've seen a surge in gold prices a few months after.

While it may be true that not all that glitters is gold, gold has not yet lost its shine, and today is a great day to give this metal some special attention

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