World stock markets lost more than $8 trillion this year, as investors fear the global community could dip into recession.
Volatility is continuing in 2016, as the Dow loses 1,575 points.
The NASDAQ is nearing bear market territory, as former high-flying stocks like Apple, Twitter, Tesla and Amazon.com fall from lofty valuations.
Oil has plunged under $30 a barrel, as supply concerns return with a vengeance, damaging global markets…
Collapsing energy prices have forced dozens of energy companies into bankruptcy… with Peabody Energy (BTU) and Chesapeake Energy (CHK) possibly headed in the same direction…
European markets have taken a hit, as stocks in Portugal, Spain, Greece and Italy fall apart over sovereign debt issues and the ability of governments to repay debt.
Greek markets have now fallen to a 25-year low.
The Shanghai Composite has fallen 22% from 2016 highs of 3,538.
Japan’s Nikkei 225 just plummeted 918 points overnight – its worst drop since June 2013 – thanks to a collapse in banking stocks. There are even fears that Deutsche Bank could stage the next Lehman-style collapse over liquidity issues.
But smart investors have still found a way to make money… with gold.
In fact, gold bugs seem to be the only ones smiling these days.
The Safe Haven is Up 13% since January 2016
While gold did fall out of favor over the Federal Reserve’s decision to hike rates in December, fears of even more hikes are beginning to die off. In fact, as investors bet global headaches will force the Fed to scale back plans for further interest rate hikes, gold has rallied 13%.
That spike in prices now makes gold the best performing commodity of the year… and one of the only major assets to post respectable gains this year.
The reason for that is simple.
Global market sell-offs are a simple reflection of the unrelenting fear coursing through investors these days. Instead of taking on risk, they’re headed for perceived areas of safety, such as cash and gold. We can see that as gold spikes well off lows of 1,061 to just above 1,200 in weeks.
If fears of a global recession persist, the value of gold could continue to rise.
Gold is a reliable source of value when investors worry about economic doom.
Its part of the reason gold rallied well off 720 lows in 2009 to 2011 highs of 1,923. While we can speculate about repeat performance, it’s a wait-and-see at the moment.
What I can tell you is that the fear is palpable.
It’s why investors have pushed into the SPDR Gold Shares ETF (GLD) – up 12% -- and the Market Vectors Gold Miners ETF (GDX) – up 41%.
Of course, if the markets are wrong about further interest rate hikes, all bets are off on gold.
But the Fed would be foolish to ignore what’s really happening to the economy.
In the meantime, though, a potential bull market in gold may have just begun…
It’s why The Cheap Investor is reviewing several gold stocks that can turn a profit, as the financial crisis persists. Stay tuned…