Why now may be a good time to buy gold and silver

Lately, gold and silver prices have been on the decline, but lower prices for the metals aren’t likely to last long, according to one bullish strategist.

David Beahm, president and chief executive officer of precious-metals retailer Blanchard and Company, makes the case that now may be the appropriate time to scoop up metals that have been dinged in recent trade.

“With all of the uncertainty out there, now is the time to add gold and silver to a portfolio,” said Beahm.“ Both metals performed exactly as they should have during the 2008 financial crisis and they will do the same during the next crisis, wherever it comes from,” he said.

Gold futures prices GCM7, -1.48% which settled at one-month low of $1,248.50 an ounce Wednesday, scored a gain of 1.4% in April, but lost 1.6% last week, according to FactSet data tracking the most-active contracts. Meanwhile, silver prices SIN7, -1.34% finished Wednesday at $16.546—the lowest since early-January. They’ve suffered from two-straight monthly and weekly declines.

“There are a number of economic, political and military events that Blanchard feels serve as the trigger for the next leg up in gold, and the current price consolidation for metals, while equities are pushed to all-time highs, serve as a great buying opportunity for diversification-seeking investors,” Beahm said.

He warned, however, that “the end of the buying opportunity comes when the crises that are happening all over the globe resolve themselves.”

Beahm highlighted a number of “hot spots” for geopolitical tension, including Syria and North Korea, where President Donald Trump is engaged in a testy face-off with Pyongyang’s leadership.

“Any of these simmering situations could boil over at any time, which would attract another round of safe-haven investment into the gold market,” he said.

Meanwhile, investors continue to monitor the “uncertain fate of [European Union] stability and upcoming elections there,” he said.

In France, a presidential election win by populist candidate Marine Le Pen would be viewed as “potentially disruptive to the global economy and financial markets as she is expected to push for a French exit from the European Union,” said Beahm. That would create “another Brexit-like situation that would be a supportive factor for the gold market.”

Over in the U.S., the Federal Reserve is “in hiking mode,” but official interest rates remain “historically low, which is gold-positive,” he said.

Read: Fed holds interest rates steady, dismisses first-quarter slump as ‘transitory’
And U.S. stock investors are pricing in “expectations of a significant economic and corporate-earnings boosting tax relief package,” he said. “If that tax package does not produce faster economic growth to cover the significantly lower revenues independent experts believe the plan will create, the U.S. deficit will rise significantly, and that is bullish for gold” too.

Beahm also pointed out that even as U.S. equities tap record highs, gold has managed to outperform stocks year to date.

Year to date, gold futures have gained more than 8%. Comparatively, the S&P 500 index SPX, -0.02%  has climbed less than 7% so far this year.

The equities market is “overbought, overvalued and vulnerable to a cycle turn or correction lower at any time,” said Beahm. “Gold would benefit from a downturn in equities.”

He said gold is likely to trade in the $1,250 to $1,350 range during the second quarter of this year, and moves to the downside should be seen as “buying opportunities.” He added that the same holds true for silver, which is likely to trade in the $16.80 to $19 range for the period.

Gold prices may rise to $1,400 by year-end, and test all-time highs at $1,900 in the long term, he said

5/4/2017
Market Watch