With typically solid bank stocks slumping, now may be one of the best times ever to buy gold products for your portfolio. Even stocks of some of the most well-known banks are falling, from the country’s largest, Wells Fargo (WFC), which already fell 11 percent this year to Bank of America (BAC), the third largest bank in the United States, which plummeted 21 percent.
Here are three reasons to buy gold products now.
- Financial stocks are not starting 2016 off strong. According to Bloomberg Business, the Standard & Poor’s 500 Financials Index plunged 11 percent so far this year—the worst monthly performance in over four years. Meanwhile, the Standard & Poor’s 500 dropped eight percent
- Bank performance is an indicator of the economy overall. When the demand for loans decreases, this is a sign that the economy is not healthy. The more money our banks lend to real estate buyers and businesses, the more interest earned. So not only is interest income falling, but when the health of the economy is poor, a greater number of borrowers default or don’t pay their loans back in full. In turn, people spend less, take fewer vacations and the economy is not stimulated. The state of the economy prompts investors to look for more solid products to invest in.
- Gold has climbed to a three-month high. Just last week, gold closed at $1,125 an ounce—it’s highest price since November 2015. While the majority of stocks are down 8 percent during this three month period, gold is up 6.1 percent. All indicators show that gold is “carving out a bottom,” which means its price has stopped falling and has formed a bottom, from which it can only climb higher. When stocks carve out a bottom, this means buyers are grabbing it at this price, known as the “floor.” Buying stocks in this stage is less risky than buying those in a downtrend. Since gold has stayed at its floor since November 2015, this means it will most likely go up—making now a great time to buy.
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