Is the bottom in for gold?

Looking at gold's monthly chart, you'll see that it closed in red for 7 months in a row. This hasn't happened in 50 years: it seems like everyone who wanted to sell has already done so.

Of course, the only real reason for this downward trend is the Fed's aggressive monetary policy, including the latest 0.75% increase.

However, if you compare gold with other asset classes, it definitely looks better than bonds and stocks.

The key question is, when will the Fed give up and stop raising the interest rates? Regardless of the Midterms' outcome, the Fed is unlikely to find political support for more rate hikes. The government is facing a huge increase in the cost of borrowing combined with a record $31 billion debt burden, while the economy could be hit by a dramatic recession fueled by the crisis in the real estate market.

A monetary policy easing usually leads to an explosion in commodity prices. However, a global recession makes a copper or oil rally unlikely – while gold has all the chances to become the star of the next commodity cycle.

As most fiat currencies are losing their value, the yellow metal looks like a great investment opportunity. However, we are forgetting another important point: the amount of real gold that can be purchased in the market is around 100 less than the circulating 'paper' gold. If even 5% of investors decide to redeem their gold ETFs for physical metal, the price will go stratospheric.

Why isn’t this happening, then? Central banks are trying to keep the monetary system within the limits carved out in the past few decades. But at some point, people will understand that only physical gold has real value — while its paper derivatives don’t.

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