There is certainly no shortage of things happening right now that could potentially affect financial asset prices. One of the major potential catalysts for price action this week is likely to be Wednesday’s Fed meeting.
It is widely expected that the central bank will take another step towards normalizing monetary policy. The central bank will likely raise the Fed Funds Rate by another 25 basis points. Markets seem prepared for such a move from the Fed, and will probably be far more interested in what Fed officials have to say about their plans going forward.
The central bank’s plans regarding rates, or the so-called dot-plot, will be the primary area of investor focus. There has been some speculation that the Fed may look to become more aggressive this year. The central bank is currently expected to hike rates three times this year and another three times next year. There has, however, been discussion of a fourth hike this year, or even the possibility of a 50 basis point hike at one of the meetings.
A 50 point hike seems quite unlikely, but given the fact that such an idea has been floated, the Fed could potentially be concerned it has already fallen behind the curve. The last time the central bank hiked rates by 50 points was in 2000, and such a move is considered to be more of an “outlier” than anything else. Of course, that was a very different market back then, and the move pushed rates to 6.5%, quite far from current levels.
Assuming the Fed takes a more gradual approach and elects to hike rates four times rather than three, an additional hike may be enough to make stock investors jittery. The Fed has a nearly impossible task at hand: staying ahead of inflation while also trying to avoid slowing the economy into recession. Something may have to give, and given recent rhetoric on inflation, the Fed could potentially take a more aggressive stance.
Ether scenario could potentially be bullish for gold, however. Rising inflationary pressures and a weaker dollar could eat away at purchasing power and net returns. A more aggressive Fed, on the other hand, could fuel a recession and major reversal in stocks and risk assets-also potentially fueling buying interest in gold and other perceived safe haven assets.
One could argue that the current economic and geopolitical landscape is highly bullish for gold, and the market could simply be gearing up for what could be a significant and protracted bull market. That bull market may coincide with the end of the run higher in stocks, and such a reversal could be closer than many anticipate.
Now is the ideal time to consider adding an allocation in physical gold. This key asset class not only carries the potential for significant price appreciation, but also may potentially provide an effective hedge against rising inflation, lower stocks and geopolitical issues.
Adding physical gold to your portfolio has never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold. Advantage Gold associates are here to answer any questions you may have, and can even show you how to incorporate this important asset class using your IRA account.
Don’t wait for higher inflation or the next major stock market crash before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, central bank, Fed, fed funds rate, gold, inflation, interest rate hike