Stock Market Takes Drastic Fall
US stocks took a massive plunge on Friday. The Dow Jones fell nearly 1,000 points. This is its fourth consecutive weekly decline. The S&P 500 and Nasdaq 100 recorded their third straight weekly drops. Investors are reacting to new comments from Fed Chair Jerome Powell. He indicated bigger interest rate hikes ahead.
“I would say 50 basis points will be on the table for the May meeting,” said Powell. The Fed is struggling to contain an inflationary rate that has surged to 40-year highs in recent months. Analysts interpret his statement to mean that a 75-basis-point increase is now a possibility. “75bps is the new 25bps,” Bank of America said in a Friday note. They emphasized that an interest rate shock is likely. 1
A rate increase next month would mark the first time since 2006 that the central bank increased its policy rate at back-to-back meetings. These would also be the biggest increases in the federal funds rate since 1994.
Mr. Powell’s comments injected fresh volatility into the stock market. It has been whipsawed this year by the war in Ukraine, soaring inflation and rising Covid-19 cases in China. Many traders are now worried that the Fed’s tightening cycle could tip the economy into a recession.
A Gold Buying Opportunity
Bond yields and the U.S. dollar are surging higher after the Fed’s rate announcement. Typically, gold loses its luster when those go up. However, industry experts are still bullish on gold. They view the slight drop in gold prices as a great time to buy.
The swelling demand for gold was seen in the market. Investors pulled $17.5 billion out of global equities over the past week. That was the biggest weekly outflow this year. Investors also pulled $8.7 billion out of bonds and $55.4 billion from cash. In turn, they poured $900
million into gold.2
The major banks restated their support for gold. Goldman Sachs said that strong demand from investors, central banks and consumers will continue to rise through the year. Therefore, bullish gold prices will continue. They reiterated their year-end price target of $2,500.
Bank of America also believes in gold. Technical analysts at Bank of America said that gold appears to be forming a “cup and handle” pattern. Which means they see gold prices hitting record highs. Their current price target is now $2,175. Any drop to $1,940 is a buying opportunity according to BofA.
Finally, Wells Fargo is also not giving up on the precious metal as the bank sees gold prices moving above $2,000 this year.
“The bottom line is that we still like gold and are maintaining our 2022 year-end target price range of $2,000-$2,100 per ounce,” said John LaForge, head of real asset strategy at the bank.3
Despite all the headwinds, there is plenty of bullish sentiment in the marketplace, which will continue to support gold. If you want to secure your assets, and seize this gold buying opportunity, contact AHG about opening a Gold IRA today.