Here’s Why Gold Prices Will Skyrocket
If you want to know where gold prices are headed, then pay attention to the buyers. Their actions suggest the yellow precious metal could soar in 2016.
As it stands, there’s a buying frenzy in the gold market. Even those who said gold bullion isn’t worth owning are now saying it’s worth a look. Best of all, the buyers remain persistent and it doesn’t look like they will stop buying anytime soon.
Consider the gold sales at the U.S. Mint. As of April 19, the U.S. Mint sold 310,500 ounces of gold bullion in American Eagle coins in 2016. In the first four months of 2015, the U.S. Mint sold just 175,500 ounces of gold in American Eagle coins. (Source: “Bullion Sales/Mintage Figures,” U.S. Mint, last accessed April 19, 2016.) If you do the simple math, you will find this represents a year-over-year increase of close to 80% in gold bullion demand!
Here’s something more: if the U.S. Mint continues to witness the surge it has seen this year so far, it’s on pace to sell over one million ounces of gold bullion in 2016—it’s highest amount since 2011.
If you look at gold sales at mints around the world, the figures suggest there’s another gold rush in place.
But this isn’t all…
Look at demand for gold out of India. Saying the very least, it continues to amaze us how much the country is buying despite the government of India attempting to curb the demand.
In January alone, 93,303 kilograms of gold, or 93.3 tonnes, was imported into the country. In the same period a year ago, that number was 57,567 kilograms, or 57.5 tonnes. (Source: “Foreign Trade Statistics of India,” Directorate General of Commercial Intelligence and Statistics, last accessed April 19, 2016.) This represents an increase of 60% year-over-year.
To bring that into some perspective, consider that 93.3 tonnes of gold bullion amounts to roughly three percent of total global mine production. I know that doesn’t sound big, but you have to think big picture here. If India consumes three percent of global mine production each month, in a year, that amounts to 36%.
Don’t forget China, either. The country is a strong believer in gold. Just recently, we heard that it launched yuan-denominated gold fix. This shouldn’t be taken lightly whatsoever. (I will be writing more about this phenomenon in the coming days.)
Gold Prices to Hit $2,000 Soon?
Keeping all of this in mind, I don’t know how one could be bearish on gold prices.
Dear reader, gold has been one of the best-performing assets so far this year. I will not be shocked if it continues to climb higher. It has broken above its short-term and longer-term downtrend. We could be in for big gains here.
I am calling 2016 the year when investors realize they made a big mistake by ignoring gold. They will flock to the precious metal as prices continue to go higher.
This is my prediction: in the next few years, I see gold prices of at least $2,000 an ounce.
Here’s some food for thought: if you buy an ounce of gold today at around $1,250 and it goes to $2,000, your gain would be roughly 60%. Gold stocks will pay you much more. For instance, year-to-date gold prices are up roughly 20%. Meanwhile, we have already seen a few gold stocks double in price—five times the leverage.
Simply put, if you believe my prediction of $2,000-an-ounce gold, now is the time to be taking a closer look at some solid gold miners on weakness.