The gold market is finally seeing some significant upside as risk aversion accelerates.
The metal has now broken out of its recent trading range and could potentially set its sights on a new high for the year in the weeks ahead. There are numerous issues behind the recent ascent, and many of these issues could potentially fuel the next major global recession.
The ongoing U.S./China trade war appears poised to continue. After a deal was reported to be close in recent weeks, both sides have pushed away from the bargaining table. Not only have both parties walked away for the time being, but both seemingly blame each other for the recent failure. Tariffs were recently raised by both nations and could see further increases in the weeks and months ahead if an agreement is not reached. It seems unlikely that much, if anything, will now take place until President Trump and Chinese Leader Xi Jinping meet at the G20 meeting later this month in Japan.
The war over trade was already having a measurable effect on the economies of both countries, and recent action against Mexico may only heighten investors’ risk aversion. Late last week, President Trump announced a five percent tariff on Mexican goods to go into effect on June 10th. The Trump administration has said that those tariffs will be raised further until Mexico does more to stop the flow of illegal immigrants along the U.S.-Mexican border. Mexico has said it will retaliate, but also appears ready to try to make a deal. The country has already sent a delegation to the U.S. to begin talks today that are expected to continue to at least Wednesday.
The notion of an escalating global trade war has investors on edge and has likely been a major factor behind the recent sell-offs in stocks.
The war has the potential to not only fuel a significant global slowdown, but to put the global economy into a recession. Recent key data points such as factory output and manufacturing are clearly pointing to a slowdown, and the Fed may be forced to cut rates sooner than anticipated if the situation worsens.
If you don’t think there is economic or geopolitical trouble along the horizon, simply take a look at the bond market. Bonds are seeing their biggest rally since 2008 as bets for a rate cut increase, and some analysts are now even suggesting that the central bank may have to cut not once but twice in order to combat the current slowdown.
Stocks are not, however, that far from previous highs and could have a long way to drop if the economy continues to slow. With the potential for lower stocks, a weaker dollar and increasing geopolitical risks, now may be the ideal time to diversify with alternative asset classes. The combination of lower equities, a lower dollar and lower rates could make gold the ideal asset class to look to given the economic and geopolitical environment.
Not only does gold have unlimited upside potential, but it may also potentially provide a key hedge against a weaker dollar, rising inflation and lower stocks.
Adding gold to your portfolio has never been easier, and arguably never more important. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation using an IRA account.
Don’t wait for the next major global recession or for the next bear market in stocks before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: bond market, china, global economy, hedge, hedge against inflation, mexico, raised tarrifs, recession, risk aversion rises, trade war, weaker dollar