Gold price had a relatively good performance in 2023 even as its performance lagged that of key assets like the Dow Jones, Nasdaq 100, and S&P 500 indices. Gold jumped by about 12.6% during the year and reached its all-time high of $2,145.
Gold price could do well in 2024
I have a feeling that the gold price will continue doing well in 2024 for three reasons. First, geopolitical risks are still rising. On Tuesday, Iran sent its warships to the Red Sea as the crisis in the region continued. This decision risks leading to a full-blown war involving American vessels. Gold is often seen as a good hedge against these risks.
Second, America’s public debt is expected to continue rising in the coming months. Data shows that the country’s public debt has jumped to over $33.9 trillion, a few months after it crossed the $33 trillion level. This means that the country’s debt burden will end the year at almost $35 trillion.
Third, the Federal Reserve has pointed to rate cuts in 2024. This is a major change since the bank was hiking rates in the past two years. It has pushed them to a two-decade high in a bid to fight inflation. Gold tends to do well when the Fed is cutting rates.
Finally, technicals are supportive of gold price upside. On the weekly chart, we see that gold is stuck at an important level, where it failed to move above since August 2020. This means that it has formed a triple-top pattern, a bearish sign.
However, it has also formed an inverted head and shoulders pattern, whose neckline is at $2,080. Therefore, a move above the all-time high of $2,145 will be a bullish sign. It will invalidate the triple-top pattern and move much higher.
Gold IRA scams
One of the biggest risks for gold investors is the so-called gold IRA. This is a multi-billion dollar industry that has cost many people, especially the elderly, millions of dollars over the years.
The gold IRA industry, which mostly runs ads on conservative outlets like Fox News and Newsmax, has grown over the years despite numerous lawsuits.
In 2023, California and CFTC sued Regal Assets and its founder, Tyler Gallagher, accusing him of misappropriating customer funds. Tyler, a Forbes contributor, was accused of using these funds to fund his lavish lifestyle.
A year earlier, authorities shut down Metals.com and accused the management of misappropriating customers over $185 million. Other companies that have been accused of wrongdoing include Augusta Precious Metals and Lear Capital.
The idea behind gold IRA scams is relatively easy. These companies convince their customers that the economy is about to crash and that gold offers a good way to hedge against risk. They then recruit well-known celebrities like Rudy Giuliani, Sean Hannity, and Jordan Peterson to promote them.
After this, these companies partner with Royal Canada Mint, which sells them the coins, which they sell at a huge markup. In most cases, these gold IRA companies don’t display the price of gold in their websites. Instead, they insist on talking to the customer directly about the price, which is often much higher than the market price. In this case, even if gold price jumps sharply, the gold IRA holder sees no benefit.
There are several approaches to investing in gold. I believe that the best way is to use a gold ETF like the SPDR Gold Trust (GLD), which has over $58 billion in assets and an expense ratio of just 0.40%. Sprott Physical Gold Trust (PHYS) is also a good alternative.
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