June 2020 - onthemark


Monthly Archives: June 2020

Gold Prices: Five Reasons Gold Is Set To Explode

Gold prices are retracing from highs today after touching their highest level in more than seven years. The gold price hit a peak of $1,779 yesterday as investors started to diversify their bets. Five key factors are likely to push gold prices higher in the coming days.

Lets dive deeper.

Coronavirus: Second Wave

Investors are largely risk-averse due to the threats of coronavirus second wave. New cases have started to surge. It was expected that there would be some spike in coronavirus cases as economies began to re-open. But what wasn’t priced in was that the situation would start to get out of control just as it did in Texas. New cases have soared 4.5%, and hospitals are close to their full capacity. 

Australia has reported its largest one-day spike in coronavirus cases in nearly two months, and this has raised alarm bells of a possible second wave. 

The UK has announced the re-opening of its pubs and restaurants, and travel restrictions are likely to be eased off from next month. Remember, the UK was one of the worst countries in terms of dealing with the Covid-19 crisis, and it has the third-largest casualty rate due to coronavirus. If appropriate measures are not taken and respected, we will probably see another coronavirus wave coming to the UK. 

Of course, positive news on the Coronavirus vaccine or success in calming down the protests, and protecting the global economy from damage can keep the gold prices in check, and this may halt the sharp rise that I am expecting. 

Possible New Tariffs On Europe 

Donald Trump, the man who is known for escalating trade tensions, anchored trade tensions once again yesterday. Trump is weighing new tariffs on $3.1 billion of exports from the UK, Spain, France, and Germany. If tensions continue to rise on this issue and Trump doesn’t back off from his stance—which could be one of his tactics to show himself strong ahead of the US elections—investors are likely to steer away from riskier assets. 

However, if for some reason, the trade tariffs are avoided, or investors do not see this a potential threat to global economic growth, gold bulls may not succeed in pushing the gold price higher. 

China-US Trade War

China is not a country that is going to sit on its hand and let the Trump administration to bully it. The Phase-one US-China trade deal has become immensely fragile due to coronavirus. China has reduced its Agriculture and poultry from the US.  There has been confusion about the US-China trade deal, and Trump has also talked about “decoupling” from China. In addition to this, China sees the US stance on Hong Kong as interference in its domestic affairs. 

Traders do not like the US picking a fight with the second biggest economy of the world, and we have seen the evidence of this last year that jolted the US stock market. 

If, for some reason, we see the relationship between the US and China getting back on track with no further threats to the US-China trade deal, we may not see a massive surge in the gold price. 

The US Unemployment Claims 

The weekly jobless claims data continue to paint a very dull picture for the US labour market. Sadly, with the regional shutdown of stores in the US, it seems the minor recovery we have seen so far could be under a significant threat as well. In simple terms, the unemployment claims numbers are already ugly, and they are likely to become even worse because companies like Apple AAPL have begun the process of re-closing of their stores in US coronavirus hotspots. 

The job market is the most important for the Federal Reserve, and Fed monetary policy is highly reflective of this. The Fed is determined to keep the interest rate lower for longer, and they are unlikely to increase the interest rates anytime soon. Another major central bank, the Bank of England, has provoked a new idea concerning interest rates, and will not increase the interest rates while the government balance sheet is mammoth. Andrew Bailey, the governor of the Bank of England, has talked about this, and, likely, the Fed will also pay attention to this notion. 

Earnings season 

The third earnings quarter is currently wrapping up. At the beginning of this quarter, there was some hope for improvement as the economies began to re-open. But the emergence of the second corona wave is likely to trigger another cautionary note from US companies, and investors are not going to like it. The US stock market rally that we have seen after the Covid-19 stock market crash could lose its momentum. Again, the risk-off mode is likely to spur interest in gold. 

However, if the US corporates start to focus more on the positive side and for some miraculous reason their cash burn ratio goes down, we may not see much movement in the gold prices.

OriginalNaeem Aslam

Case Study: Identifying The Relationship Of Gold To Crypto

Since the beginning of modern history, gold has been an important means of storing value. In the past 200 years, the gold sector has remained relatively unchanged. However, there have been some interesting developments implying that change is just around the corner.  

Over the years, gold has proven to be a suitable alternative to both fiat currency and cryptocurrency. The real question is, could it perhaps be both? In this article, we will be looking at three different trends and what this really means to the whole world of crypto: bitcoin, stablecoins and legislation.

Bitcoin could serve as a replacement for gold

During a recent Bitcoin summit in Israel, Nick Szabo stated that “Central banks will end up using bitcoin as a reserve currency.” In a Q&A session, Szabo also said, “I think it will be one of the many reserve currencies that can be used to underpin value on other things. There doesn’t have to be only one anymore.”

In an interview with MarketWatch, Inton said, “If cryptocurrency were to displace gold’s investment case, the implications for gold prices would be devastating. 40% of gold demand relates to investment, so a shift in investment from gold to cryptocurrency would be a seismic shock.” If this event were to come to pass, the repercussions would send shockwaves throughout the world’s global economy.

Felix Hartmann from the crypto hedge fund Hartmann Capital says, “Bitcoin bridges the gap between currency and a store of value asset. It maintains the speed and flexibility of fiat currency while remaining independent of central banks and governments and their macro-economic policies such as inflation.”

Gold-pegged stablecoins

For a large number of new cryptocurrencies entering in 2018, most have proven to be inflated, volatile or unreliable. That’s why 2018 saw ICO’s on the downfall with stablecoins on the rise. This later became known as the “stablecoin frenzy,” mainly due to the benefits of cryptocurrency without the volatility.

Gold-pegged stablecoins emerged from the stablecoin frenzy. One good example of this is Novem who pegged their cryptocurrency to gold. According to a recent statement, the company has approximately 35 kg in LBMA-certified gold (Q1: 2019), stored securely by Loomis International. The amount of gold translates to almost $1,500,000 in collateral.

The aftermath of the stablecoin frenzy may lead to gold-pegged stablecoins flourishing—especially if the value is delivered to both consumers and businesses across the precious metal industry.

Gold and legislation

With a worldwide monetary crisis being just around the corner, Ron Paul who served US Congress for several terms from 1976 until 2013, wrote a formal paper, called “The Dollar Dilemma: Where to From Here?”

Paul said, “There are several major efforts being made to replace the fiat dollar with gold or cryptocurrencies, while other countries are making plans to challenge the dollar as the world’s reserve currency.” What this really means is that gold or cryptocurrencies could, in the very near future replace fiat.

However, this begs the question, what happens next? Crypto investors need “regulatory clarity.” According to a recent article by Cointelegraph, legislation clarity may indeed be underway. “Two United States congressmen introduced a bill in the House of Representatives on Dec. 20 that would exclude digital assets from being defined as securities.”

Final remarks

In the near future, it will be interesting to see what happens with gold, bitcoins and stablecoins. A lot of this hinges on the government’s aptitude to provide investors with regulatory clarity, stablecoin adoption, and will gold continue to be the reserve currency? Right now, it’s too early to say, but one thing remains clear—the financial markets are in for a change.

Original Luke Fitzpatrick

5 Tips for Operating a Home-Based Business

Operating a home-based business can be both exciting and challenging. But conducting business at home during a pandemic can take that challenge to new heights. Possible hurdles can range from having children underfoot to the temptations of the refrigerator, TV, and social media, not to mention the anxiety of ongoing news updates. Maintaining the security of sensitive documents is frequently overlooked, with potentially disastrous consequences. Following the five strategies below can help ensure that working from home is productive, safe, and profitable. 

Take Care of the Basics

One of the first orders of business before launching a home business is taking care of the legalities. Depending on the nature of the business, it may be necessary to obtain a general business license, a special health permit, clearance for signage, or sales tax licenses. Professionals such as accountants may need to obtain a specific license from the municipality, county, or state. If clients will be coming into the home, special parking permits may also be needed. It may also be necessary to obtain a doing business as (DBA) certificate or another formal registration for businesses that are operating under an assumed name.

Recognize the Pros and Cons of Working from Home

On one level, working from home is great. There is no dealing with rush hour traffic or crowded public transportation. Most days it’s possible to work in comfy pajamas – or dress from the waist up for online conferences. However, working from home also has its downsides. It’s far too easy to spend the day lounging about snacking and watching daytime TV. When work gets hectic, living spaces can be transformed into a disorganized mess with papers and office gear scattered everywhere. Isolation is also a potentially major problem – not only because of loneliness but also from the lack of opportunity to make connections. The solution is to embrace the advantages of working from home while also establishing a personalized routine.

Establish a Dedicated Home Office or Workspace

The ideal situation for working from home is to set aside a separate room as a dedicated office. A guest bedroom can be converted to an office while including a comfortable sofa bed or day bed to accommodate overnight guests. Whether or not a separate room is available, establishing dedicated office space is essential. An ergonomic chair, a desk or table at the proper height, sufficient natural and supplemental light, and ample storage are all key to creating a home office that inspires productivity. Stock up on office staples such as paper, postage, and ink for the printer to avoid excessive trips to the store or post office.   

Minimize Distractions and Maintain Productivity

There is no need to rise at 6 a.m. and be in front of the computer by 8 a.m. However, establishing a regular work routine is key to maintaining a reasonable level of productivity. Turn off the TV and avoid spending hours on social media. 

Scheduled breaks are also important. Take five minutes to get up and walk around the room. Allow 15 minutes or half an hour for a TV break – but avoid watching anxiety-provoking news shows. It’s also important to schedule time to interact with colleagues or contacts via Slack, Skype, FaceTime, Zoom or some other interactive chat or videoconferencing tool. Taking social media breaks is also OK – as long as you hold yourself to strict time limits.  

Protect Sensitive Paper and Computer Documents

Working from home is not only convenient for small business owners, but also for cybercriminals and identity thieves. Downloading and installing current computer software security updates is a must. And while it may be tempting to skimp on outdated equipment, this penny-wise and pound-foolish strategy can backfire in the case of ransomware or another malware attack. 

Likewise, proper disposal of paper documents is a must. Opting to shred documents or even burn them is an effective way of ensuring sensitive personal or financial records do not wind up in the wrong hands. 

Embracing the Work from Home Lifestyle

Working from home can be a liberating change from the 9 to 5 routine. And during a worldwide pandemic, working from home is one of the safest ways to maintain an income. However, it is important to take care of legalities, set up an effective home office, and establish good cybersecurity and paper disposal practices to minimize the risk of identity theft and other security hazards. It is also important to establish a regular routine and make time for interactions with other people to reduce loneliness and maintain productivity.

OriginalEileen Conant

Is It Better to Save or Invest Your Money?

When building wealth, it is important to understand the similarities and differences between saving and investing your money. Knowing when to save and when to invest your money is a key part of your wealth building plan.

Let’s start from the top. Basically, saving money is putting money aside on a regular basis. You spend less money than you earn and put the rest in a savings account at your bank. This should be an automatic part of your monthly budget. Remember, saving money is an important part of being financially successful.

Investing is taking this a step further, and putting money into the stock market by buying stocks, bonds, mutual funds, or other investment vehicles. Investing is absolutely imperative in building long-term wealth.

What Is Investing?

Once you have a good amount saved, you can begin investing money. Investing is the way that you will begin to really grow your money and begin to build wealth. For example, if you keep your savings in a savings account, the amount of interest you will earn will be very small. However, if you invest in mutual funds or stocks, your rate of return will be much higher.

The big difference? The stock market fluctuates, and it’s never a sure thing that you’ll earn money. In fact, you can lose money in the stock market, so be sure to keep that in mind when investing.

You will eventually come to the point where your investments make more than you are contributing each month. Your wealth really begins to grow at that point.

What Should I Invest In?

When you begin to build wealth, it is important to spread your risk. Mutual funds are an easy way to diversify your portfolio. These funds are spread out over many different stocks so that if one company fails, you do not lose everything. Another good idea? You should have your money invested in more than one mutual fund. You don’t need to have 20 mutual funds, but three or four is a good start.

If you feel confident with investing in individual stocks, be sure that you spread your investments over a wide variety of companies, businesses, and sectors of the market (For example, do not invest all your money in tech.) It is not enough to invest in different companies if they all in the same industry because sometimes entire industries can take a hit.

You may consider investing in other things. One example is real estate. This can bring you a good passive source of income. Real estate also tends to increase in value over time. However, do not do this until you are ready to purchase in cash, and can pay for any repairs or unexpected expenses out of cash flow. It also may require more work on your part, depending on how you choose to rent it out and whether or not you use a property management company, which can cut into your rental property earnings.

Real estate can be a great investment, but it also has its risks. Much like the stock market, property values can go up and down.

When Should I Start Investing?

Most financial advisers recommend that you wait to start investing until you have paid off the majority of your debt. However, this really depends on your interest rate. If you are paying a 0% interest rate on your debt, it may make more sense to begin investing before it’s paid off, since you can earn a greater percentage in returns. (The average rate of return on the stock market is around 7%.)

It’s also a good idea to have a solid emergency fund saved before you begin investing. You should have money in your emergency fund that relatively liquid and easily accessible, without paying a large penalty. A money market account at your bank is a safe place to put this.

Investing can help you build wealth. But keep in mind that you won’t be able to truly build wealth – and increase your net worth – until you spend less than you earn and get out of debt. That’s why it’s still wise to stick to a budget, so you can save and invest effectively.

Who Can Help Me Start Investing?

So you’re ready to invest, but you’re not quite sure where to start. A good first step is to meet with a financial advisor.

A financial adviser can explain the different types of investments that are available to you. He or she can explain the risks and the potential gains to help you find investments that you are comfortable with.

Another option is to select an online brokerage site or robo-investor. The fees are lower and if you know the types of investments you want to make, you can save money in the long run.

One final thing to keep in mind: Investing is a long-term strategy for building wealth. It’s important to be patient, and ride out the times when the market is not doing well. Once you do this, then you can truly be on your way to building net worth.