Today, it’s the optimists who rule.
The S&P 500 has rebounded above its October 2019 levels… Not to be outdone, the Nasdaq Composite is now trading at new records.
At the same time, we have more than 3 million coronavirus cases in the U.S. alone and negative economic growth… the worst since the Great Recession.
New unemployment applications are still running at a million-plus levels… And many businesses—from retail to restaurants—are suffering.
From a rational point of view, this doesn’t look right.
The economy is still in danger… and with continued business closures due to COVID-19, there’s no confidence in a fast recovery.
But as I’ve discussed in these pages, there’s a good reason for the market to climb: The unprecedented amount of fiscal and monetary stimulus the Fed has unleashed.
Regardless of the ultimate market direction from this point on, there’s one asset that’s poised to benefit from the nearly unlimited liquidity…
Gold.
It’s a traditional hedge against both inflation and deflation. And also poised to respond to the growth of money in the economy.
So far this year, one monetary measure, M2, which includes money market accounts, deposits, and CDs of less than $100,000 and balances in retail money market mutual funds, jumped 20%—to $18.4 trillion on June 22, a new all-time high. (For comparison, it’s more than three times the growth rate for all of 2019.)
In short, thanks to the Fed’s policies, we have plenty of money in circulation.
And gold is set to benefit.
Gold is a monetary asset (historically, it’s been used as a currency)… and it’s a time-tested safe haven.
Typically, during inflationary times, the price of gold goes up.
But in deflationary times too, gold is a good bet… partially because it holds value better than many other assets, and because it can absorb money earmarked for other commodities.
One of my favorite ways to play a gold bull market is the SPDR Gold Trust (GLD), an ETF that tracks the price of gold.
The yellow metal has, once again, proven its safe-haven status: It’s up 18.7% year-to-date (while the market is down about 2.4% over the same time).
Already, GLD outperformed stocks on a 3-year basis. And it’s running neck and neck with the S&P 500, if you look at the past 5-year period (although the market has outperformed GLD by more than twice… about 1,500 percentage points over the past 10 years).
Meanwhile, GLD is about $15 away from its 10-year high, established in 2011.
I expect it to hit that 10-year high soon.
But I think GLD can go much higher than that…
This ETF should keep rising on momentum alone. And, as I discussed above, there’s a strong fundamental case for gold. Gold is money, at least it used to be… and in the era of unlimited QE and money printing, its monetary properties make it attractive once again.
The upside potential is huge… especially if the stock market comes under additional pressure. But I expect GLD to remain strong even if the market keeps rising, thanks to all the monetary action and extra liquidity.
Every investor should have a stake in gold today. And this ETF is one of the easiest ways to own it…
Editor’s note: The current market rebound has a lot of investors letting their guards down… and Genia believes they could lose their shirts as a result.
She’s put together a FREE report explaining the surprising forces that are really driving the rebound… why it could reverse just as quickly as it started… and what you need to do NOW to prepare for the worst.
