The gold market has been garnering more headlines in recent weeks as the metal has been trending higher and seemingly staged an upside breakout from its previous trading range. With the metal trading solidly above the $1400 level, a test of resistance around $1450 could be the next major tipping point.
Analysts are citing numerous reasons for gold’s recent upside, including risk aversion and a stronger technical posture.
Below are three reasons that gold may continue higher, and these issues could potentially push the metal to previous all-time highs or beyond.
- Recession: The next major global recession could be closer than markets anticipate. Key gauges of economic activity such as factory output and ISM services readings have fallen below expectations. Last month’s jobs report, which showed only 75,000 jobs added in the month of May, is also a source of concern. The ongoing U.S./China trade war is clearly having effects on the economies of both countries, and those effects are likely to deepen as the war on trade continues.
- Lower rates: The Fed will almost certainly begin cutting the key interest rate this month. Some analysts have suggested the central bank will start with a 25-basis point cut while others think the Fed will be more aggressive and cut by 50-basis points. A July rate cut may simply be the first of a series of rate cuts, and the Fed may be forced to cut rates all the way down to zero once again. Starting from an already-low Fed Funds rate of just 2.25% to 2.50%, the Fed could be forced to fire up a fresh round of QE if the slowdown turns into full-blown recession.
- A weaker dollar: The dollar has enjoyed some significant upside since President Trump took office. Those gains may have run their course, however, as the effects of tax cuts and government spending fade further. With the Fed also set to begin cutting interest rates, the dollar could come under pressure and start trending lower. If the Fed sees fit to begin fresh QE measures, the declines in the dollar could be exacerbated. The long-term trend in the dollar is lower, and that trend could be set to continue in the months and years ahead.
Of course, there are numerous other issues that could also propel the gold market higher.
Lack of a trade deal with China, increasing tensions with Iran and North Korea’s nuclear ambitions to name a few.
With stocks near all-time record highs, the aging bull market may be on its last legs and the time to diversify away from equities is now. Given the potential for a recession, weaker dollar, lower stocks and numerous geopolitical risks, there may be no better asset class to look to than gold.
Adding gold to your portfolio has never been easier and possibly never more important. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the key 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 stock market collapse or for gold to test previous all-time highs before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: basis point cut, economic activity, government spending, ISM service readings, metal trending higher, next global recession, trade war