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Strained and Fearful, Investors Flee Overvalued Market

Strained and Fearful, Investors Flee Overvalued Market

  • Investors are leaving an overheated stock market in record numbers
  • They are driven by fear fed by years of high interest and inflation rates, political chaos, and geopolitical conflict
  • Physical precious metals, especially in a Gold IRA, can diversify and protect retirement savings from stock market volatility

Investors Beat a Retreat

Economic data is pointing to some concerning trends underlying the current stock market rally. According to the numbers, US stock market is shrinking. Just as billionaires did months ago, regular investors are pulling their money out at a near-record pace.

Seen as an omen of economic trouble, Americans are strategically moving their assets to safe haven physical precious metals.

Fear is currently driving the market according to CNN’s Fear and Greed Index. The fear is fed by years of high interest and inflation rates, political chaos, and geopolitical conflict. Morgan Stanley said, “Summer 2024 may prove volatile with momentum stalling.” The market already big swings as traders react to unexpected economic data. The presidential election is only going to increase the volatility.1

Investors are losing their taste for risk and are retreating. Bank of America said their clients have been net sellers of stocks for five weeks in a row. They sold off $5.7 billion more in stocks than they purchased. That is the highest outflow since last July.

A sign that the market is in retreat is the shrinking number of public companies. JPMorgan CEO Jamie Dimon said,” The total [of public companies] should have grown dramatically, not shrunk.” He expressed concern about the implications by following up with, “This trend is serious.”2

Strained and Fearful, Investors Flee Overvalued Market

Americans Squeezed

The retreat may go beyond simply avoiding risk. Some Americans are being squeezed out of the market. Rent, gas, food, and childcare cost 15%-40% more today than they did just three years ago. Inflation is causing 46% of US middle class workers to slash contributions to their retirement funds according to a Primerica survey. 3

The survey continued to find that 67% say their income is falling behind the cost of living. Average paychecks have risen but fallen short of the higher cost of living. As result, 36% are using credit cards to keep up with expenses. Credit card debt is now at record highs. The problem is worsened because higher interest rates have made debt increasingly expensive. With credit cards maxed out, Americans are being forced to rein in even essential spending. 4

The pausing of retirement contributions can have long term ramifications. American are going to be finding themselves unable to retire comfortably, if at all. The Primerica survey revealed almost 80% of respondents don’t think they’ll be better off next year. Meaning the retreat is likely to continue.

A Strategic Retreat

American may be pulling out the market to secure their gains. Or they may be forced to cover their expenses. Whatever the cause, exiting the market now might turn into a fortunate decision.

Richard Bernstein is the chief investment officer of the RBA hedge fund. He says the mega-caps stocks are overvalued and risk a big correction. As of now, the top 10 stocks in the S&P 500 make up 35% of the benchmark’s total value. That is the highest percentage ever recorded. And Goldman Sachs economists said the market looks to be the most overvalued since 1932.

Strained and Fearful, Investors Flee Overvalued Market5

Bernstein predicts the losses from a correction could rival the dot-com crash. After the boom in internet stocks, the Nasdaq Composite dropped 78% from its peak. Tech stocks continued to struggle over the next 14 years. A “lost decade” in the stock market followed, with the S&P 500 losing 1% from 1999 to 2009.6

Bernstein said, “Fundamentally, it makes zero sense. The bond market is saying corporate profits are going to be strong … but the equity market with this incredibly narrow leadership of seven companies is saying that it’s an apocalyptic earnings outlook. I think the stock market’s in a bubble and the bond market is right.”7

Time to Diversify

Modern portfolio theory stresses diversifying your assets when the stock market is overvalued and on the verge of crashing. Converting assets into physical precious metals is a time-tested diversification strategy. Gold has historically maintained its value during economic downturns, offering a safe haven against inflation and recession.

Conclusion

As money becomes tighter, each decision about saving for your retirement carries greater weight, necessitating assets that can preserve wealth. Unlike stocks, which can plummet during market corrections, gold typically retains or even increases in value, providing stability and protection for your portfolio. By including gold, you mitigate risk, ensuring a portion of your nest egg is safeguarded against the volatility and uncertainties of a financial crisis. And by opening a Gold IRA, you can gain tax advantages along with the wealth protection benefits of physical precious metals. Call us today at 800-462-0071 to learn more.

Notes:
1. https://www.cnn.com/2024/06/05/investing/premarket-stocks-trading/index.html
2. https://www.cnn.com/2024/06/05/investing/premarket-stocks-trading/index.html
3. https://moneywise.com/retirement/middle-class-workers-are-slashing-or-cutting-contributions-to-retirement-funds
4. https://moneywise.com/retirement/middle-class-workers-are-slashing-or-cutting-contributions-to-retirement-funds
5. https://markets.businessinsider.com/news/stocks/stock-market-outlook-correction-dot-com-bubble-crash-buy-opportunity-2024-6
6. https://markets.businessinsider.com/news/stocks/stock-market-outlook-correction-dot-com-bubble-crash-buy-opportunity-2024-6
7. https://markets.businessinsider.com/news/stocks/stock-market-outlook-correction-dot-com-bubble-crash-buy-opportunity-2024-6
 

 

Gold Buying Opportunity

Gold Buying Opportunity

Pause in Gold Surge a Signal to Buy Gold prices faced headwinds as hopes for a near term cut in interest rates declined. Prices also stalled with a pause in China’s central bank purchasing. Forecasters predict that gold’s upward trajectory will resume based on numerous factors, making this an opportune time to protect retirement funds … Read more

What’s Behind Gold’s Record Setting Upswing

SEO title preview:What's Behind Gold's Record Setting Upswing

  • Gold’s record-breaking ascent is fueled by numerous drivers
  • Excess money printing, geopolitical conflict, central bank purchasing and fears over the national debt are giving gold tailwinds
  • Now is an opportune time to add protect portfolio value with physical precious metals

Gold Prices on the Rise

In recent months, gold has been reaching new all-time highs as it continues its upward trajectory. With numerous factors behind the upswing, now is an opportune time to protect your retirement funds with physical precious metals.

Multiple Drivers Impacting Gold Prices

Gold’s current rise is not just an economic blip; it’s backed by multiple strong drivers:

Significant Money Printing: Since 2020, there has been a substantial increase in money printing, which is now starting to take effect on the economy. From 2020 to 2024, the M2 money supply increased from $15 trillion to $22 trillion. This has decreased the purchasing power of the dollar by 25-30%. People are turning to gold as a store of value as the oversupplied dollar depreciates.

Geopolitical Conflict: Ongoing major conflicts around the world are spurring safe haven demand and contributing to the upward pressure on gold prices.

Central Bank Purchases: Central banks are buying gold at the fastest rate in 55 years, further driving up demand. They seek to fortify their own economies with gold by hedging against inflation, moving away from the dollar, and securing against potential sanctions.

National Debt: Crossing $34 trillion and climbing fast, the national debt is at crisis levels. But the government is unwilling to cut spending. Already costing more than defense, the cost to service the runaway debt could strangle all government services, including Social Security. Americans are buying gold to protect against inevitable inflation and collapse.

What's Behind Gold's Record Setting Upswing

Gold as a Response to Economic Uncertainty

Given these factors, it’s no wonder that investors are flocking to gold. Gold offers stability in times of economic uncertainty and has historically been a trusted store of value. The increasing cost of gold in terms of dollars reflects the declining trust in the US dollar and government policies.

Investment banks are predicting even higher gold prices by the end of the year and beyond. Experts believe that if we see any rate cuts or economic instability, gold prices could soar even higher. Interest rate cuts could push gold to $2,700 an ounce. Meanwhile, some analysts say further bank failures or election chaos could see gold reaching $3,000 an ounce or higher.

Considering Silver

For those looking for a more accessible option, silver is also worth considering. Currently valued at around $28 an ounce, silver has significant upside potential. It’s investment and industrial demand are at historic levels while production deficits are unable to keep up. It’s not just a less expensive alternative to gold but also a valuable hedge in a recession or rate cut environment.

Conclusion

Gold has stood the test of time as a reliable store of value. It isn’t just a safe haven; it’s a smart diversification tool. It acts as an insurance policy against currency devaluation and economic instability. In today’s volatile economic environment, having a portion of your portfolio in gold makes sound financial sense.

Contact American Hartford Gold today at 800-462-0071 to learn more about how you can secure your financial future with a Gold IRA.

Banking System Grows More Unstable

Banking System Grows More Unstable

  • The threat of a banking crisis caused by the failing commercial real estate sector is increasing
  • Academic and Government research points to a growing number of banks vulnerable to failure
  • Americans are seeking to shelter their assets in physical gold and silver before the chaos erupts

Bank Risks Increase

High interest rates and plummeting demand have put the commercial real estate sector on the edge of collapse. As overexposed regional banks teeter on the brink of crisis, studies show large banks are also at risk. Things look like they are going to get worse before they get better as the prospect of a full-blown banking meltdown emerges. Americans are seeking to shelter their assets in physical gold and silver before the chaos erupts.

Regional banks have been at increasing risk from the collapsing commercial real estate (CRE) market since the Fed started their aggressive rate hikes. The risks stem from the repricing of CRE loans at higher rates as the real estate cycle turns. Banks are stuck holding mortgages and construction loans that are underwater compared to plunging property values.
Now, that risk seems to be spreading to larger banks.

Banking System Grows More Unstable1

While not to the extent as regional banks, big firms are exposed to CRE risk from direct loans. But they are also at risk by indirect lending to Real Estate Investment Trusts (REITs). REITs are firms that buy and operate commercial real estate, selling shares to investors who want to gain exposure to the space.

However, these vehicles are often debt dependent. They are vulnerable to high interest rates. With higher-for-longer rates depressing revenue, investors are antsy to get their money out. With the rise in redemption requests, the REITs have tapped the banks for more credit. The number of REIT credit lines extended is increasing faster than other forms of borrowing. The lenders are putting themselves in a dangerous position if a crisis hits.

A new study says the greater exposure to commercial real estate debt increases overall systemic risk. When commercial real estate REITs heavily draw on credit lines during widespread financial stress, it can seriously impact the largest banks. This means that the overall risk from commercial real estate is likely much higher than what the banks’ direct exposure suggests. REIT loans raised the largest bank’s exposure by about 40%.2

More Banks at Risk

A Florida Atlantic University study found a growing number of banks facing failure due to the exposure to commercial real estate. They identified that 67 of the largest US banks have CRE loans exceeding 300% of their total equity capital. Regulators consider that level excessively risky. 3

The study cited Flagstar Bank and Zions Bancorporation as the highest risks. Flagstar’s CRE portfolio comprised a stunning 553% of its equity. Zions was 440% of its equity. Both banks rely heavily on uninsured deposits. This makes them extremely vulnerable to bank runs.

“Should another bank fail, depositors may pull money from these highly exposed banks, potentially triggering a banking panic reminiscent of last year,” study authors warned. 4

Banking System Grows More Unstable

The FDIC Sees Risk

The government is recognizing the growing risk of a banking crisis. The Federal Deposit Insurance Company (FDIC) increased the number of banks on its “Problem Bank List.” It went up from 52 to 63. The number of banks on the watch list is 60% greater than the quarter preceding the collapse of Silicon Valley Bank (SVB). The bank run on SVB triggered a national panic. It helped fuel the collapses of First Republic and Signature Banks.

The FDIC found the amount of exposed assets rose to $82.1 billion. Alongside the increase in endangered banks was an increase in the number of unrealized losses. More than $517 billion in losses are now being held. 5

Wall Street Weighs In

Morgan Stanley warned commercial real estate prices could crash 40% in a disaster worse than the financial crisis of 2008.

“More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points,” their analysts said. High borrowing costs and tighter credit conditions could raise difficult hurdles for big real estate investors as they seek to refinance a mountain of loans.

Morgan Stanley says the damage won’t stay contained to the property owners and banks. It will extend to “interconnected business communities, private capital funders and owners of any underlying securitized debt,” they note. “The tech and consumer discretionary sectors will not be immune.”6

Conclusion

High interest rates and plummeting demand are devastating the commercial real estate sector. No longer limited to regional banks, its collapse threatens to spark a full-blown banking crisis. The impact of which could undermine the entire financial system in a way not seen since the Great Financial Crisis of 2008. That crisis caused retirement savers to lose up to 50% of their funds. With the writing on the wall, now is the time to protect your portfolio with physical precious metals. A Gold IRA from American Hartford Gold can help secure your financial future. Call 800-462-0071 to learn how today.

Notes:
1. https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iNNwTUUX4yY4/v3/620x-1.jpg
2. https://www.businessinsider.com/commerical-real-estate-crisis-bank-debt-contagion-reits-cre-lending-2024-5
3. https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-loans-put-67-banks-at-risk-of-collapse/492047
4. https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-loans-put-67-banks-at-risk-of-collapse/492047
5. https://dailycaller.com/2024/06/04/regulators-announcement-red-flag-banking-industry/
6. https://markets.businessinsider.com/news/stocks/commercial-real-estate-prices-outlook-crash-financial-crisis-morgan-stanley-2023-4?_gl=1%2A171pvcl%2A_ga%2AMTY0OTQ1MjIyNS4xNjU2NTA4ODQ3%2A_ga_E21CV80ZCZ%2AMTY4MDY5MDY4Ny44NjkuMS4xNjgwNzAyMzc0LjYwLjAuMA..&utm_medium=referral&utm_source=yahoo.com
 

 

Analysts Warn: Prepare for a Crash

Analysts Warn: Prepare for a Crash

  • Some analysts see record setting stock prices as a prelude to a bursting bubble, with prices dropping as much as 65%
  • Recessionary forces could knock the support out from overvalued stocks
  • Americans can prepare for the stock crash by moving into safe haven assets like physical gold & silver in a Gold IRA

Looming Stock Market Crash

To some analysts, record-setting stock prices don’t seem to be climbing to new heights but rather racing towards the edge of a cliff. Facing potential overvaluation and recession, stock prices have been predicted to crash as much as 65%. Americans are cautioned not to let over-optimism and fear-of-missing-out prevent them from protecting their assets from a major market correction.

The warnings of an impending crash are coming from several sources. John Higgins of Capital Economics says stocks are in a late-stage bubble. That means stocks are in for a steep rally before the bubble bursts. He points to the S&P 500 and DJIA hitting record highs recently. “Bubbles tend to inflate the most in their final stages as the excitement sort of reaches fever-pitch,” Higgins warned.1

Higgins says that today’s hype around AI resembles the dot com bubble of the 90s. When that bubble burst, the Nasdaq lost 77% peak-to-trough in the early 2000s. The overall market saw $5 trillion in value wiped out in a couple of years. According to Capital Economics, the bubble could burst as soon as the end of next year. That would be five years, the length of the dot-com bubble. 2

Analysts Warn: Prepare for a Crash3

Warnings from Wall Street

Some Wall Street veterans are taking a bearish view of the current stock market rally.

Gary Shilling is an American financial analyst and commentator who appears regularly in publications such as Forbes, The New York Times, and The Wall Street Journal. He correctly identified the US housing bubble in the mid-2000s. Shilling expects a recession to hit by the end of the year. He thinks a weakening labor market will crush investor confidence. As a result, the stock market could fall as much as 30%. “You look at all the kind of speculation that we’ve had out there, it’s indicative of a lot of overconfidence, and that usually gets corrected and corrected violently,” said Shilling.4

John Hussman is the president of Hussman Investment Trust. He correctly predicted the sharp downturns in 2000 and 2008. He thinks the S&P 500 is trading at similar extremes last seen in the run-up to the 1929 Great Depression. Hussman thinks the S&P could crash 65% based on a combination of “extreme valuations, unfavorable market internals, and dozens of other factors.” A loss that size would wipe out a decade of gains.5

Analysts Warn: Prepare for a Crash

BCA Research strategist Roukaya Ibrahim warned that a 30% correction in the stock market could be sparked by a recession early next year. He thinks overvalued stock prices and slowing growth will send the S&P back down to 3600. Ibrahim points to the April employment report which signaled an economy in decline. “Eventually, the unemployment rate is going to take higher and that’s going to lead to concerns about a recession,” Ibrahim said.6

Market Indicators

One indicator going off is the ‘Hindenburg Omen’. It has predicted two previous stock market crashes. The ‘Hindenburg Omen’ indicator considers the percentage of stocks in an exchange making 52-week highs and lows, along with other market breadth metrics, to assess the potential for a market crash.

The indicator successfully predicted the 1987 market crash and the 2008 financial crisis. And it is sounding the alarm again. Now it is going off despite record market highs. Poor market breadth is the cause for concern. Only a handful of stocks are buoying the whole market.

Other signs are showing that the economy is heading towards recession. A recession could crater stock prices.

Top economist David Rosenberg points to the Sahm Rule. Rosenberg famously predicted the 2008 recession. The Sahm Rule is a way to identify the start of a recession using the unemployment rate. It signals a recession if the three-month average unemployment rate rises by 0.5 percentage points or more above its lowest point in the previous 12 months. The rule is about to go into effect. Unemployment ticked higher than 3.9% in April. In addition, manufacturing shrank for the 17th month out of the last 18 months.

The Fed’s “higher for longer” interest rates are also pushing the economy towards a hard landing. Albert Edwards, the Societe Generale strategist, said, “”I believe the Fed is sowing the seeds of yet another policy disaster.” He maintains that decades of near zero interest rates fueled speculative bubbles that kept “bursting in their faces.” And now, he thinks, suddenly high interest rates are going to burst the AI bubble. 7

Conclusion

While it may seem that record setting stock prices may never end, forecasters are warning to brace for a crash. The meteoric rise will inevitably fall. The question is how hard and how fast. According to some analysts, everything will be great until it isn’t. Then prices could drop 65%, devastating retirement funds. Now is the time to prepare for a market drop by learning how a Gold IRA can protect the value of your funds. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://markets.businessinsider.com/news/stocks/stock-market-crash-prediction-dot-com-bubble-correction-economy-recession-2024-5
2. https://markets.businessinsider.com/news/stocks/stock-market-crash-prediction-dot-com-bubble-correction-economy-recession-2024-5
3. https://m.foolcdn.com/media/dubs/images/stock-market-bubble-infographic.width-880.png
4. https://markets.businessinsider.com/news/stocks/stock-market-crash-predictions-recession-soon-inflation-corporate-profits-decline-2024-5?utm_medium=ingest&utm_source=markets
5. https://markets.businessinsider.com/news/stocks/stock-market-crash-predictions-recession-soon-inflation-corporate-profits-decline-2024-5?utm_medium=ingest&utm_source=markets
6. https://markets.businessinsider.com/news/stocks/stock-market-crash-predictions-recession-soon-inflation-corporate-profits-decline-2024-5?utm_medium=ingest&utm_source=markets
7. https://www.businessinsider.com/stock-market-crash-recession-warning-signs-interest-rates-fed-edwards-2024-5?utm_medium=ingest&utm_source=markets&_gl=1*1eqjxbf*_ga*MjEyNjU3MzkyMi4xNjYyNDEwODU4*_ga_E21CV80ZCZ*MTcxNjk5ODIzOC4xNDkuMS4xNzE2OTk4MzEwLjU5LjAuMA

 

Dollar in Danger, the BRICS Currency is Coming

Dollar in Danger, the BRICS Currency is Coming

BRICS Currency to be Released For the past 12 months, the BRICS alliance has been working on launching its own currency. Russia and Iran confirmed they are collaborating on a currency project for the BRICS. The alliance is expected to launch the currency this year. The release of which could cause radical changes in the … Read more

Silver Set to Surge, $50/oz possible

Silver Set to Surge, $50/oz possible

  • Silver prices are reaching new heights and are predicted to keep climbing
  • Record industrial and investor demand are far outstripping supply, supporting high prices
  • With safe haven benefits and a lower entry point than gold, now is an opportune time to add silver to your Gold IRA

Silver Prices on the Rise

As gold shatters records week to week, silver is carving its own upward path. Individuals and hedge funds are flocking to silver to protect their wealth from rising inflation. Silver’s role as an industrial and monetary metal is creating a “perfect storm” to drive prices higher.

Because both metals are seen as safe investments during economic uncertainty, silver typically rising along with gold. And now is no exception. Silver is seeing its best prices in 11 years, trading at over $32 an ounce. Silver outperformed gold in recent weeks. It gained 35% this year against gold’s 18% rise. It is finding support to stay over $31 an ounce with room to move higher. A Commodity Futures Trading Commission report showed traders are betting on silver to keep rising. Bullish positions are expected to increase now that silver has broken $30 an ounce. 1

Market conditions have been building for silver’s breakout for a while as industrial demand fuels part of the spike. Used in solar panels and electronics, silver is an essential component of the global green technology push. Industrial demand hit a new high in 2023, for a third consecutive year, according to the Silver Institute.

Prices are being forced up as supply cannot keep up with demand. There are notable shortages in the supply of silver. Based on this, TD Securities predicts silver may break $50 an ounce. 2

The “Silver Squeeze”

There is now talk of a potential “silver squeeze.” A “silver squeeze” refers to a rapid increase in demand for physical silver that outstrips available supply, causing prices to surge. This phenomenon is often driven by coordinated buying efforts from retail investors or speculative traders. They aim to create an artificial shortage and force up prices.

The term gained prominence in early 2021 when a group on Reddit’s WallStreetBets forum attempted to replicate the GameStop short squeeze by collectively buying silver. Their goal was to force large institutional short sellers to cover their positions, theoretically sending silver prices skyrocketing. Their efforts had a temporary impact, driving prices up around 9%. However, the recent surge in silver prices has reignited talks of another potential squeeze in 2024.

Investor Demand – $50/oz silver?

Barring a silver squeeze, there’s still a rapid swelling of investor demand alongside industrial demand. Together, they can support higher silver prices. TDS Securities said growing demand could wipe out the above ground stocks of silver within 12 to 24 months.

A senior commodity strategist at Canadian Bank said, “The last time silver prices broke through $30/oz, it traded to $50/oz in less than ten weeks.”3 They think that if silver breaks above $30 per ounce, it could trigger a lot of ETF buying. This would reduce the available silver stocks at the London Bullion Market Association. The last time there was a big push to buy silver, it led to a huge demand of about 110 million ounces in a few days. That would cut the available silver by 35% if it happened again.

Gold/Silver Ratio

Silver Set to Surge, $50/oz possible4

Analysts point to the gold/silver ratio to say that silver is just getting started as it plays catch up to gold. Silver’s recent rise has pushed the gold/silver ratio to 75 points. Its lowest since December 2022.5

The gold/silver ratio is a simple way to compare the prices of gold and silver. It tells you how many ounces of silver you need to buy one ounce of gold. For example, if the ratio is 80, you need 80 ounces of silver to get one ounce of gold.

When the ratio is high, like 80, silver is relatively cheap compared to gold, which can be a good time to buy silver. When the ratio is low, like 50, silver is more expensive relative to gold, making it a better time to buy gold instead.

The average gold/silver ratio over the past 20 years is approximately 68:1. Which means today’s ratio indicates that silver is relatively cheap compared to gold. It suggests that silver might be undervalued.

Silver Set to Surge, $50/oz possible

Silver in Uncertain Times

Silver’s rise is not surprisingly from a historical perspective. There is a correlation between spikes in silver prices and economic downturns. Recessions have historically been “ramp up” periods for silver prices, setting the stage for significant gains after the economic downturn.

During the Great Recession of 2007-2009, silver prices initially spiked. They reached a high of $19.24/oz in February 2008 before dropping to a low of $9.09/oz in October 2008 near the depths of the recession. However, after the recession ended, silver prices surged again. They hit a post-recession high of $48.70/oz in April 2011, a 435.8% increase from the recession low. 6

Conclusion

Silver is breaching new highs and analysts think this is only beginning of a long bull cycle. Industrial and investor demand are soaring at the same time of record supply shortages. With safe haven benefits and a lower entry point than gold, now is an opportune time to learn if adding silver to your portfolio or Gold IRA is right for you. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.kitco.com/news/article/2024-05-21/silver-eyes-50-td-securities-predicts-major-breakout-after-31-support-holds
2. https://www.kitco.com/news/article/2024-05-21/silver-eyes-50-td-securities-predicts-major-breakout-after-31-support-holds
3. https://www.kitco.com/news/article/2024-05-21/silver-eyes-50-td-securities-predicts-major-breakout-after-31-support-holds
4. https://www.usatoday.com/money/blueprint/investing/silver-price-05-22-2024/
5. https://www.usatoday.com/money/blueprint/investing/silver-price-05-22-2024/
6. https://www.silverinstitute.org/silverprice/2000-2010/#:~:text=During%20the%20first%20half%20of,of%20generally%20firm%20fabrication%20demand.

 

Gold is the Winner of Biden’s Green Trade War

Gold is the Winner of Biden's Green Trade War

Green Trade War The long simmering trade war between China and the US is heating up after Biden announced new ‘green’ tariffs. China has already been positioning itself for a new dominant role in the global economy. Tensions between the two countries are rising as the prospect for both economic war and actual war in … Read more

Personal and National Debt at Crisis Levels, Threatening Economic Stability

Personal and National Debt at Crisis Levels, Threatening Economic Stability

  • Personal and national debt are reaching epic, dangerous proportions
  • Unchecked debt could drive the economy into deep recession
  • Americans are protecting their assets from the consequences of runaway debt with Gold IRAs

Debt Skyrockets

Personal and national debt are both on a dangerously sharp upward trajectory. As auto loan and mortgage delinquencies rise, credit card delinquencies skyrocket. At the same time, Wall Street leaders are loudly calling for action on an unfolding national debt crisis. The unchecked debt of citizen and nation threatens to undo both.

Credit Card Delinquencies Hit New High

Americans are turning to their credit cards to pay for sky high prices. Now, the New York Federal Reserve data show a growing number of Americans are falling behind on their credit cards. Considered a sign of worsening financial distress, credit card delinquencies are at a 3-year high. Delinquencies have surpassed pre-pandemic highs. They rose from January to March and continue to go up.

The percent of balances in serious delinquency is at its highest level since 2012. The Fed admitted they don’t know exactly what is behind the increase in delinquencies. One theory is that excess savings are gone. And though the job market looks strong, Americans are losing their jobs and then getting new ones at a lower salary. However, nonstop inflation is the likely prime candidate. Cumulative inflation on necessities like food and rent is over 18%.

Personal and National Debt at Crisis Levels, Threatening Economic Stability1

Achieve is a digital personal finance company. Their survey showed the main reasons were inflation and a reduction in work and income. It cited high interest rates as making it harder to pay down debt. A quarter of consumers reported reducing their spending over the past three months. That doesn’t bode well for this economy, 70% of which is based on consumer spending.

Economists are worried because the rise in credit card usage is coming when interest rates are astronomically high. APR hit a new record average of 20.72% last week. Rates are high because of the Fed’s aggressive policy to try and tame inflation. 2

Household debt rose $184 billion the first quarter of this year and is now at $17.69 trillion. One in five credit card users are dubbed “maxed-out borrowers” because they used at least 90% of their available credit. One third of this group has gone delinquent in the past year.3

So Goes the Nation

As personal debt is wreaking havoc on individuals, the national debt is putting the country in crisis. The national debt recently surpassed $34 trillion. It is on course to exceed $45.7 trillion within a decade. That is more than 110% of the gross domestic product.4

Interest payments are the fastest growing segment of the budget. Interest on the debt has almost doubled to $659 billion in 2023 from $345 billion in 2020. The US has hit a worrying milestone. In the first seven months of this fiscal year, interest payments on debt cost taxpayers more than what we spend on defense and Medicare. Only Social Security costs more right now. But in less than 30 years, paying interest on the debt might become our biggest expense. 5

High interest rates are making the problem worse. As the debt reaches unsustainable levels, it will contribute to a negative cycle of even higher interest rates. Social Security and Medicare, the untouchable ‘third rail’ of politics, will see automatic cuts in the coming years if the government doesn’t act. All retirees would face a 21% cut in Social Security benefits in just nine years. Medicare will face similar cuts in 12 years. 6

Personal and National Debt at Crisis Levels, Threatening Economic Stability

The Government Non-Response

Goldman Sachs CEO David Solomon said the US policymakers need to focus on the ballooning national debt. He warned that the government’s “ability to spend without constraint is not unlimited.” “Ultimately,” he said, ” the market will challenge” the federal government’s free spending ways. 7

The Biden administration does not seem to be heeding such warnings. Biden unveiled a record $7.3 trillion election-year budget. It increases social spending while taxing businesses and high earners.

“Continuing to ignore these warnings puts beneficiaries at risk, creates economic uncertainty and adds to our fiscal challenges,” Michael Peterson, CEO of the Peter G. Peterson Foundation, said. “In fact, we haven’t been this close to the depletion of Social Security since the last bipartisan reforms done in 1983.”8

A Republican proposal for a bipartisan commission about the debt is dead in the water. Proposed over six months ago, it collapsed from left-wing fears of spending cuts and right-wing fears of new taxes. More than 100 Democratic lawmakers signed onto a letter opposing the commission.

Conclusion

Debt on a macro and micro level is posing a grave threat to individuals and the country. Both are sinking into a debt spiral where mounting interest payments and continued borrowing choke off beneficial spending. The mirror results of which end in a deep recession. And unfortunately, no one is taking measures to solve either problem. The bill for Americans and America is coming due and it looks like it is going unpaid. Economic volatility and recession are likely to follow. People interested in protecting the value of their retirement funds are investigating the benefits of physical precious metals. In particular, a Gold IRA is designed to safeguard funds from the consequences of runaway debt. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.cnbc.com/2024/05/14/credit-card-delinquencies-rise-as-more-gen-zers-are-maxed-out-ny-fed.html
2. https://www.foxbusiness.com/economy/credit-card-delinquencies-are-surging
3. https://thehill.com/business/4665135-credit-card-delinquencies-surge/
4. https://nypost.com/2024/05/13/business/goldman-sachs-ceo-david-solomon-raises-alarm-on-us-debt/
5. https://www.usatoday.com/story/opinion/columnist/2024/05/14/biden-national-debt-payments-social-security/73670903007/
6. https://www.usatoday.com/story/opinion/columnist/2024/05/14/biden-national-debt-payments-social-security/73670903007/
7. https://nypost.com/2024/05/13/business/goldman-sachs-ceo-david-solomon-raises-alarm-on-us-debt/
8. https://www.usatoday.com/story/opinion/columnist/2024/05/14/biden-national-debt-payments-social-security/73670903007/

Gold Prices Consolidate, Set for More Growth

Gold Prices Consolidate, Set for More Growth

  • Gold prices are consolidating around an impressive $2,400 an ounce
  • Gold demand is being fueled by geopolitical conflicts, strong central bank purchasing and safe haven demand from rising inflation and growing debt
  • Gold is predicted to break $3,000 an ounce within six to eighteen months.

Gold Prices Consolidate at New Highs

Coming off a streak of record-breaking highs, the price of gold appears to be entering a consolidation phase around an impressive $2,400 an ounce. Gold’s momentum is overcoming traditional negative correlations. As it settles into this new price range, gold is poised to resume its upward trajectory.

Gold’s consolidation phase refers to a period in which the price of gold trades within a relatively narrow range. During this phase, the market is in a state of balance. It remains stable until new developments motivate more buying and selling. Consolidation phases usually occur after periods of rapid price increases. They are characterized by reduced volatility and trading activity. They can serve as a pause or breather in the market before the next significant move in either direction.

Right now, gold is consolidating around $2,400 an ounce – a new record weekly close for the precious metal. Gold’s rally to this price is breaking long held fundamental beliefs. It resisted downward forces like high interest rates and a strong dollar. Gold is benefiting from overall increased demand. That demand is fueled by the geopolitical conflicts in Ukraine and the Middle East. Gold is also fulfilling safe haven demand for investors as stocks struggle to maintain their near record highs. Central banks and individuals are rapidly acquiring gold as a hedge against inflation as it creeps upwards again. Gold Prices Consolidate, Set for More Growth1

Go to Gold

Ryan McIntyre is a managing partner at Sprott Inc. He said during this economic cycle, investors should move away from the S&P 500 and into gold. He is looking past the normal headwinds brought by high interest rates. Instead, McIntyre thinks that the S&P 500 is very expensive right now compared to how much money companies are making (a measure called the Shiller Price to Earnings Ratio). Holding onto these expensive stocks might not be the best idea because it would require companies to make a lot more money in the future to justify these high prices. So, instead of investing in expensive stocks, McIntyre sees gold as a potentially better investment option.2

Gold is positioned to take advantage of any new changes in the economy. A rate hike from the Fed would increase holding costs for gold but it will hurt the value of stocks as well. “A rate hike will be bad for gold, but it will be a lot worse for the S&P 500,” according to McIntyre. 3

The rapidly growing national debt is also powering gold demand. US Treasuries aren’t offering the same wealth protection. Gold is still coming ahead as the easiest and trustworthy of safe haven assets.

Gold & Interest Rates

Gold is even breaking with its normal correlation to interest rates. Recently, Federal Reserve Chair Jerome Powell surprised markets with a hawkish comment. Inflation was coming in hotter than expected. Powell cast doubt on its readiness to cut interest rates. Gold prices, instead of dropping, were unfazed by the comment.

Gold Prices Consolidate, Set for More Growth

A softer than expected jobs report renewed expectations on potential interest rate cuts. “We continue to expect two rate cuts this year, in July and November,” Goldman Sachs wrote in a note. Gold climbed on the news. As a matter of fact, the forces holding gold prices down seem to be weakening. “The downside that we’ve seen over the last few weeks might actually be running out of steam, opening (the) door for gold prices to resume their upward trajectory,” said Daniel Ghali, commodity strategist at TD Securities.4

The Fed must ultimately lower interest rates at some point in time. And when that happens, gold prices could surge again in what is expected to be a protracted bull market.

Future Prices

Analysts from Citigroup have predicted that gold, “aided by geopolitical heat” and “coinciding with record equity index levels,” could surpass the price of $3,000 per ounce in the following six to 18 months. According to Citigroup, the demand is likely to be coming from managed money players who are catching up with central bank demand. 5

Bloomberg’s senior commodity specialist Mike McGlone is also certain that gold would hit the $3,000 price per ounce. He cites the combination of two financial indicators – the lowest CBOE S&P 500 Volatility Index (VIS) and the highest US Treasury bill rates since 2007.6

Conclusion

Gold prices are consolidating at a new high level. Demand is backed by geopolitical conflict, central bank buying, and rising inflation. Debt fears and potential interest rate cuts are also supporting gold. Analysts see this plateau as a springboard for gold to reach even greater heights. Now is an excellent time to learn how adding gold to your portfolio with a Gold IRA can protect and potentially increase your wealth. Call American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.americanhartfordgold.com/gold-price-charts/
2. https://www.kitco.com/news/article/2024-05-07/its-no-brainer-switch-sp-500-gold-sprotts-ryan-mcintyre
3. https://www.kitco.com/news/article/2024-05-07/its-no-brainer-switch-sp-500-gold-sprotts-ryan-mcintyre
4. https://www.cnbc.com/2024/05/06/gold-rises-on-fed-rate-cut-hopes-middle-east-tensions.html
5. https://finbold.com/heres-when-gold-price-could-hit-3000/
6. https://finbold.com/heres-when-gold-price-could-hit-3000/