The gold market exploded this week, as numerous economic and geopolitical issues fueled a buying frenzy that has seen prices hit the highest levels in six years. The upside seen this week could simply be the tip of the iceberg and the opening rally of a multiyear bull market.
The U.S. Federal Reserve this week left interest rates unchanged. The central bank did appear to be very divided, however, over the course of policy going forward. The Fed left itself a lot of wiggle room for a rate cut, with many analysts expecting the central bank to cut rates by 25 basis points next month. Further rate cuts could be seen based on economic conditions, and geopolitics may also influence policy.
The U.S. Fed joins the ECB in taking an increasingly dovish stance towards policy, and stocks have rallied while bond yields and the dollar have declined.
The market appears to be looking to the Fed to ride to the rescue once again, and thus far the central bank seems willing to do so. The economy may not be as strong as some have suggested, and the central bank may have to cut to prevent a major sell-off in stocks.
In addition to the idea of lower interest rates, the gold market is also seeing inflows as tensions between the U.S. and Iran heat up. Iran recently shot down a U.S. drone, and the U.S. reportedly had plans for a retaliatory strike but called them off. The drone attack comes just days after two oil tankers were attacked in the region and the stakes are getting increasingly high. The Strait of Hormuz is a strategically important location, as a large portion of the globe’s oil and liquified natural gas supply travels through it. Any attempts by Iran to block or disrupt the flow of oil or gas through the strait could lead to a rapid escalation or even military conflict.
The ongoing U.S./China trade war is also having a significant effect on markets, and lack of an agreement could keep the economy under pressure.
President Trump is set to meet with Chinese Leader Xi Jinping next week at the G20 meeting in Japan, and officials from both sides were reported to resume talks ahead of that meeting. The two sides appeared to be far from a deal in recent weeks, and it is unclear if substantial progress will come from meetings next week.
The combination of a slowing global economy, the potential for lower rates, a weaker dollar and a variety of geopolitical risks may be the perfect recipe for gold. Market dynamics have already begun to shift, and recent all-time highs in equities could represent a major top in the weeks or months ahead.
Given the fragility of the global economy, risk of recession and numerous geopolitical risks, now may be the ideal time to diversify away from stocks and into hard assets. There may be no single better asset class to turn to than gold. Not only does this metal have significant upside potential, but it may also provide a hedge against rising inflation, a weaker dollar and lower stocks.
Adding gold to your portfolio has never bene easier, and perhaps never more important. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the vital role it may play in the years and decades ahead. 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 stocks to collapse before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: 6 year high, economy under pressure, G20 meeting, geopolitical risks, lower interest rates, market dynamics, risk of recession, slowing economy