So far, 2014 has been a pretty good year for gold with the precious metal up about $100 from the beginning of January until the beginning of August. During that same time period, silver has remained flat, with prices hovering around the $20 mark. There were several days when it looked like the precious metals were going to break-out of their narrow trading range, but apparently, the impetus was not strong enough to find true direction. Here are some strong reasons why 2015 could very well be a banner year for precious metals.
1. Federal Reserve is Poised to Act
The Federal Reserve is a deliberate body that tries to be as transparent as possible without being too specific about their intentions. When the Fed speaks, they do not mention a date when they are going to make a policy change. Instead, they use language such as “if conditions warrant” or “if the economy progresses as expected” they will raise interest rates sometime in the first half of the next year. Well, that language has been spoken this summer and Fed-watchers have interpreted to mean that the bond-buying program will come to a halt before the end of 2014 and interest rates will start to rise in the first half of 2015. Once we are in 2015, the market will know with more certainty what the Fed will do. A tighter monetary policy will weigh-down the market and be good for the precious metal markets.
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2. Fighting Around the World Will Intensify
If you think things are bad in the Ukraine, Syria, Iraq, and Israel today, just wait and see how much worse the fighting gets in another few months. We are in tumultuous times and that puts fear not only into every person in the affected areas, but also into the minds of every investor. When anxiety and fear are pervasive, precious metals do very well.
3. The Stock Market Will Take a Major Tumble
It is usually a good sign that the stock market is about to take a downward turn when you see investor interest in the momentum stocks start to wane. At about 18 times-earnings, the PE ratio of the S&P 500 Index is near the high-end of its historical range (7-22). A dividend yield for the S&P 500 of under 2 percent is another signal that the market could be heading into bear territory. No one knows for sure, but the scale is definitely tipped toward the downside for the stock market. When money leaves the stock market, some of it finds its way into precious metals.
4. Mid-term Election Results Won’t Make a Difference
If you were hoping that some new blood in Congress and the Senate would inject some enthusiasm for actually improving our economy, I’m afraid you will be sadly disappointed. Nothing will change, except the names, and we will stay on the same course as 2014. For precious metal investors, the present path of the economy is likely to mean higher gold and silver prices in 2015.
5. A Weaker Dollar
Every day that passes means that our national debt is growing bigger. At last count, the country owed more than $17.6 trillion. It does not take a genius to realize that rising debt makes the dollar worth less against other world currencies. When the dollar weakens, gold and silver prices rise.