Another round of fiscal stimulus is in the works as Washington faces a looming deadline to avoid a government shutdown.
The news has sparked instant price rises in safe-haven assets like gold.
Because the more new money that is printed, the lower our current currency value goes, leading to higher inflation.
The Federal Reserve’s actions are likely to make inflation worse. Earlier this year, they announced a major policy shift allowing inflation to “run” moderately above the average 2% goal.
And regardless, if it’s the Republicans $500 billion or the Democrats $908 billion bill proposal that is passed, the aftermath will be similar, and investors know it.
The truth is that both sides know that the people and economy need another stimulus aid package.
Whether they see eye to eye on every exact detail of the bill or not, Congress has less than seven business days to approve funding legislation to avoid a government shutdown.
It’s no longer a question of if but “when.”
According to experts, just as we saw in early to mid-2020 when investors flocked to gold to protect their wealth from the market’s volatility, we could see similar activity upon the passing of the next stimulus bill.
In a recent CNBC interview, HSBC analysts had this to say, “The fiscal and monetary response to the pandemic globally will remain highly accommodative. This will continue to provide gold and silver, as well as platinum, with reason to go higher.”
And so far, they have been correct. The dollar has been on a sharp decline.
Optimism on COVID vaccines and progress on the next US fiscal stimulus package has caused the dollar to fall to its lowest in two and a half years.
This should be one of the largest red flags to what may become of the dollar’s future performance.
The pandemic exposed an already weakened dollar. The question now is how much lower will it go before things get better?
An even better question would be, when will things get better?
For centuries gold has always been viewed as a safe-haven asset. These days it seems as if gold is becoming much more than that.