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Prepare for a “Lost Decade” in Stock Prices

Prepare for a "Lost Decade" in Stock Prices

  • Goldman Sachs predicts stocks are facing a ‘lost decade’ of stock returns.
  • The forecast is based on stock overvaluation and market concentration.
  • As stocks face a decade of decline, gold is projected to rise to $7,000 an ounce in that same time – offering a safe haven for retirement funds.

A Decade of Poor Returns

The stock market’s high-flying days could be coming back down to earth, and investors may need a new plan. Goldman Sachs is warning that the next 10 years would be a “lost decade” for stocks. Facing potential returns of just 1%, Americans can look towards to physical precious metals to fortify their retirement funds.

End of the Bull Run?

For the past 10 years, the S&P 500 returned an annual average of 12.9%. And the market continues to hit new heights. As of October 30, the DJIA was at 42,233.051. Up by approximately 137% over the past 10 years.1

Yet, Goldman Sachs said stocks could soon be facing a “lost decade.” According to their research, stocks would produce a nominal return of 3% per year. And a real, inflation adjusted return of just 1%. Those returns would be half of the average annualized return between 1928 and 2024. And in less favorable conditions, returns could potentially dip as low as -1%.2

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Prepare for a "Lost Decade" in Stock Prices3

Reasons for a Slowdown

Goldman analyzed several data sets to reach their conclusion.

Goldman compared today’s stock market to the last ‘Roaring 20s’ market 100 years ago. Today’s market is more overvalued than at almost any other time in U.S. history. The ratio of the stock market’s total market capitalization to GDP is more than five times higher today than a century ago. This ratio is known as the Warren Buffet indicator. That’s because Buffet considers it the best single measure of market valuation.

Then there is the CAPE value. The CAPE (Cyclically Adjusted Price-to-Earnings) ratio measures a stock’s price relative to its average earnings over the past 10 years. It helps investors gauge if the market is over- or undervalued. The current CAPE value is 38. That ranks in the 97th percentile going back to 1930.4

What analysts found most unprecedented was the current degree of concentration in the market. It is at its highest levels since the early 1930s. The top 10 stocks in the S&P 500 now account for approximately 33% of the index’s market value. That surpasses the 27% share reached at the peak of the tech bubble in 2000. 5

Prepare for a "Lost Decade" in Stock Prices

Heavy concentration weighs on returns. When a few stocks hold most of the wealth, any loss can sharply impact the market’s overall value. Market leaders today may not retain that position in a decade. “It is extremely difficult for any firm to maintain high levels of sales growth and profit margins over a sustained period of time,” Goldman analysts wrote.6

Other investment banks, including JPMorgan, GMO and Apollo Global Management, echoed Goldman. Apollo said the S&P 500 could see average annualized returns below 3% within the next three years.

GMO pointed to six ‘lost decades’ going back to 1900. During these times, a 60/40 stocks/bonds portfolio produced returns in the low single digits. Some failed to outpace inflation altogether. What all six periods had in common – stocks were trading at greatly overvalued prices.

The Counter Argument

Dr. Ed Yardeni is a prominent economist and financial market strategist. He offers up a different vision of the next decade. He sees a booming 2020s. In which, the S&P 500 would produce a total return of 11% annualized. He says a lost decade of stocks won’t occur if earnings and dividends continue to grow.

Yardeni dismisses overconcentration. Since tech permeates everything, he says all companies can be thought of technology companies now. And that technology will fuel higher productivity and lower costs. In turn, all companies can earn higher profit margins avoid the ‘lost decade.’

Conclusion

Yardeni’s forecast is based on unrealized potential of technology to produce profits. For him, high earnings would justify high valuations. But he operates on one hopeful assumption – that the leaders will still be leading.

However, “Hope is not a strategy.” Goldman’s data-driven forecast considers historical market trends and valuations, which may offer a more realistic assessment of the future. In contrast to falling stocks, gold is projected to reach $7,000 per ounce over the next decade.7 A potential increase of 203.82% from today’s price of $2,304. Now may be the time to protect your retirement funds against a potential “lost decade” by diversifying into physical gold. Contact American Hartford Gold today at 800-462-0071 to learn how a Gold IRA could help preserve and potentially grow your wealth.


Notes:
1. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
2. https://www.investing.com/news/stock-market-news/is-there-a-lost-decade-ahead-for-stocks-3683339
3. https://www.marketwatch.com/amp/story/wall-street-is-worried-stocks-might-be-on-the-cusp-of-a-lost-decade-1b3e2512
4. https://www.barrons.com/articles/goldman-sachs-stock-market-lost-decade-9c9fd595
5. https://www.forbes.com/sites/investor-hub/article/top-sp-500-stocks-by-weight/
6. https://www.goldmansachs.com/insights/articles/is-the-sp-too-concentrated
7. https://www.axi.com/int/blog/education/commodities/gold-price-forecasts

BRICS+ Plot New World Order

BRICS+ Plot New World Order

  • The BRICS+ Summit is meeting in Russia, focused on accelerating de-dollarization in a multi-polar world.
  • They are proposing new payments systems, banks, and a potentially gold-backed currency.
  • Held in a Gold IRA, physical precious metals can safeguard your retirement funds from the BRICS+ new world order.

BRICS+ Summit Accelerates De-Dollarization

This week, the BRICS Summit in Russia set into motion a shift that could forever alter the global economy. Leaders from 24 countries and delegations from 32 nations gathered to challenge the long-standing dominance of the U.S. dollar. Representing over 40% of the world’s population, this powerful Western counterweight is building a new world order. An order where the stocks and bonds in your retirement portfolio may rapidly lose their value. To defend against this tectonic shift, analysts recommend safeguarding your funds with physical gold.

BRICS+ Plot New World Order

BRICS+ Goals

BRICS+ was originally comprised of Brazil, Russia, India, China, and South Africa. They had long sought to challenge the economic dominance of the U.S. With this summit, they aim to reduce reliance on the dollar in international trade and finance. They are proposing new payment systems and the creation of a BRICS digital currency.

Possible Gold-Backed Currency

One of the most talked-about possibilities to emerge from this summit was the introduction of a new BRICS+ currency. Collectively, BRICS+ nations hold over 20% of the world’s gold reserves. Of which, Russia controls 8.1% and China closely follows. With these significant reserves, speculation has grown about a gold-backed currency system. A system that could rival the U.S. dollar. Rumors suggest that the currency is tentatively called the “Unit.” It would be pegged 40% to the value of gold and 60% to a basket of BRICS national currencies.1

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BRICS+ Plot New World Order2

The reality of de-dollarization is slowly but surely coming into focus.

This new “apolitical currency” could appeal to nations wary of the weaponized U.S. dollar. In an increasingly multipolar world, the BRICS see gold as a stable, universally recognized asset. Central banks from BRICS nations continue to accumulate gold at near-record levels. This buying spree suggests that a gold-backed currency is growing closer to a reality.

Russian State Duma Speaker Vyachaslav Volodin underscored these intentions. He said, “Today, BRICS unites 10 countries and 45% of the world’s population. More than thirty states are showing interest in participating in it… The time of Washington and Brussels hegemony is passing.” 3

The infrastructure for this economic shift is already being built. BRICS+ are completing an alternative to the Western-backed SWIFT payment system that allows international bank transactions. The New BRICS Development Bank is set begin as well. It would offer payments in local currencies to invest in the private sector of the member state economies.4

Impact on Gold Prices

Gold has been having a banner year. It has hit historic demand from global conflict, rate cuts, and political uncertainty. Yet the discussion of a gold-backed BRICS currency is adding powerful momentum to the upward swing.
Gold is often seen as a safe haven during times of economic uncertainty. Central bank purchases of gold have significantly outpaced purchases of U.S. Treasuries over the last decade. The move away from the dollar has been accelerated by concerns about U.S. debt and the weaponization of the dollar. As BRICS+ countries continue to accumulate gold, this trend seems poised to continue, boosting the price of gold further.

The Shift Toward a New World Order

The BRICS+ summit in Russia may not immediately overthrow the existing global financial architecture. But it has laid the groundwork for significant shifts. Plans for de-dollarization, gold-backed currencies, and alternative payment systems indicate that the BRICS nations are serious about reducing their reliance on the dollar. The momentum is building, and the foundation for a new world order is being laid.

Conclusion

As BRICS expands and more nations express interest in joining, the group’s influence is growing. While the U.S. dollar still dominates global trade, the steady accumulation of gold and the pursuit of financial independence by BRICS nations suggest that the current system is not as unshakeable as it once seemed. De-dollarization is no longer a distant prospect—it’s becoming an economic reality. Analysts suggest turning to physical gold to protect portfolio value from the consequences of de-dollarization. Held in a Gold IRA, physical precious metals can safeguard your retirement funds from the new world order. Contact us today at 800-462-0071 to learn more.


Notes:
1. https://www.kitco.com/news/article/2024-10-22/global-monetary-reset-coming-gold-get-revalued-150k-brics-summit-trigger
2. https://www.ccn.com/news/business/brics-summit-currency-talks-gold-silver-soar/
3. https://responsiblestatecraft.org/brics-new-world-order/
4. https://tvbrics.com/en/news/brics-bank-to-finance-its-members-projects-in-local-currencies/?sphrase_id=7080

Gold Could Break $3,000 in 2025

Gold Could Break $3,000 in 2025

  • Gold is projected to continue its upward trajectory into 2025, potentially breaking $3,000
  • The price is driven by monetary policy, central bank purchasing, BRICS+ de-dollarization
  • Now is the time to protect your portfolio with physical precious metals before the price climbs even higher

Gold Prices Continue to Rise

Gold prices are continuing their ascent to all-time highs. The rise is being supercharged by growing uncertainty across a changing economic landscape. Investors are already taking profits amid gold’s upward momentum. But banks such as Goldman Sachs suggest gold’s rise will continue well into 2025 – breaking new records along the way.

Interest Rate Volatility and Gold’s Role

One of the key drivers of gold’s rise has been fluctuating expectations around Federal Reserve rate cuts. Initially, there was speculation about a significant 50 basis point rate cut in the near future. However, stronger-than-expected job reports and higher-than-anticipated inflation have dampened these hopes. Despite this, more rate cuts are expected, and historically, the price of gold tends to rise by about 6% within the first six months of an easing cycle.1

This correlation between lower interest rates and higher gold prices is well documented. Safe haven gold becomes more attractive compared to other interest-bearing assets.

Divergence in Global Investment

North American investors have been steadily increasing their gold purchases. Though they are still catching up to the rest of the world. According to the World Gold Council, North Americans bought $1.36 billion worth of gold last month, compared to $1.4 billion in global inflows. Western investment is rising. But there’s still untapped potential to drive prices even higher.2

Analysts are asking whether it’s too late for Western investors to catch up. Particularly as some Western banks have been short-selling gold. Comparisons are being made to the silver squeeze of 1980. Some are predicting that gold could face a similar short squeeze. That would potentially lead to massive buybacks and unprecedented price increases.

Central Bank Demand and the BRICS+ Factor

Central banks have been significant buyers of gold. Many are turning to the precious metal as a hedge against geopolitical uncertainty and financial instability. Officially, China has not purchased gold in the last five months. But market observers speculate that central banks, including Russia’s, may be buying in secret. The World Gold Council estimated that 67% of central bank gold purchases in the second quarter went unreported. Russia, for example, is expected to spend $535 million over the next three years to replenish its precious metals reserves.3

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Gold Could Break $3,000 in 20254

The BRICS+ nations (Brazil, Russia, India, China, South Africa, and others) are hoarding gold at an unprecedented rate. These nations represent over 40% of the global population. They are using gold to diversify their reserves and to pursue de-dollarization. At the upcoming BRICS+ Summit in Kazan, Russia, leaders are expected to discuss further steps to counter the Western-dominated financial system. The draining of gold from the London Bullion Market Association (LBMA) vaults by Eastern nations is seen as a sign of resistance to the West.

A New Global Financial System on the Horizon?

At a recent panel discussion hosted by the LBMA, experts agreed that gold’s role as a reserve asset in global foreign reserves will continue to grow. Central banks from countries like Czechia, Mongolia, and Mexico have all announced plans to increase their gold holdings. They see it as a vital diversifier and hedge against falling interest rates and geopolitical risks.
The discussion also highlighted the growing appeal of gold as a global currency. As nations seek alternatives to the U.S. dollar, gold is becoming increasingly attractive for international trade. They see the world becoming multi-polar – which will support gold demand.

Geopolitical relationships are shifting. Nations fear sanctions or need to find ways to trade with sanctioned countries. Currently, the gold market is too small to meet this need for the global economy. Nevertheless, the trend suggests increased demand, which could lead to higher prices. With China reportedly preparing to launch a gold-backed yuan and Russia trading in currencies pegged to gold, we may be witnessing the birth of a new global financial system centered around gold.

Gold Could Break $3,000 in 2025

Gold Price Predictions

As of now, gold is trading around $2,640 per ounce, nearing its all-time high of $2,685. Goldman Sachs predicts that gold could continue to hit all-time highs by the end of 2024, potentially reaching the $3,000 mark by 2025. That would represent a 12.5% return on investment from the current price level.5

Goldman Sachs repeated their bullish stance. They stated, “We reiterate our long gold recommendation due to the gradual boost from lower global interest rates, structurally higher central bank demand, and gold’s hedging benefits against geopolitical, financial, and recessionary risks.”6

Conclusion

The global economic landscape is shifting. Lowering interest rates, increasing safe haven demand, and accelerating global de-dollarization is likely to keep gold on an upward trajectory. Prices are predicted to reach all-time highs in 2025. Owning physical precious metals, particularly in a tax-advantaged Gold IRA, can secure and potentially grow the value of your retirement savings. Contact us today at 800-462-0071 to learn more.


Notes
1. https://www.kitco.com/news/article/2024-10-11/gold-defies-odds-yet-again
2. https://www.kitco.com/news/article/2024-10-11/gold-defies-odds-yet-again
3. https://www.kitco.com/news/article/2024-10-11/gold-defies-odds-yet-again
4. https://assets.finbold.com/uploads/2024/10/image-70.png
5. https://watcher.guru/news/goldman-sachs-revises-gold-price-prediction-for-2025
6. https://watcher.guru/news/goldman-sachs-revises-gold-price-prediction-for-2025

A Natural Disaster to Your Retirement

A Natural Disaster to Your Retirement

  • Natural disasters and their aftereffects inflict trillions of dollars of damage on the economy
  • Beyond immediate physical damages, hurricanes result in unemployment, inflation, higher insurance, and market volatility
  • The rising intensity and frequency of natural disasters heightens the need for protective financial strategies like a Gold IRA

Hurricanes Devastate Savings

Hurricanes are among the most destructive natural disasters, leaving a trail of devastation – both physical and financial. Their damage wreaks havoc not only on the afflicted area, but on the national economy. As we face a growing number of extreme weather events, such as Hurricane Milton and Helene, understanding their economic impact has become essential to protecting one’s financial future.

A Growing Danger

Hurricanes and tropical storms have accounted for over 50% of the $1.79 trillion in damages from billion-dollar weather disasters since 1980.1

2022 – Climate disasters cause almost $30 billion in losses2
2023 – Americans experienced 114 declared disasters3
2024 – $181.7 billion in GDP losses predicted if three major hurricanes make landfall4

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A Natural Disaster to Your Retirement5

Local Economic Damage

The economic damage caused by hurricanes is vast and multifaceted. Direct costs from the storms include the immediate destruction of homes, infrastructure, and businesses. Hurricane Katrina caused over $200 billion in losses. Those losses include not only physical damage but also the broader financial aftershocks.

Joel Myers, AccuWeather’s founder and executive chairman, stated Milton is poised to become “one of the country’s most damaging and costly hurricanes.” Early estimates suggest economic losses could exceed $200 billion. That figure accounts for property damage, business closures, and significant infrastructure failures. All of which will have long-term consequences for the region.6

Hurricanes can result in mass unemployment. Following a major storm, many businesses are unable to reopen for days, weeks, or even months. Following Hurricane Katrina, for instance, over 230,000 individuals lost their jobs within ten months of the storm. This resulted in nearly $3 billion in lost wages. Helene could cause the loss of more than 100,000 jobs. 7

The repair and rebuilding efforts can stimulate economic activity. However, the net economic impact is still negative due to the massive losses and disruptions. In areas affected by back-to-back hurricanes like Milton and Helene, these losses are compounded. A prolonged period of economic stagnation can emerge.

Additionally, hurricanes disrupt key industries like agriculture and energy production. When Hurricane Ian hit Florida in 2022, the state’s citrus industry saw losses between $400 million and $700 million. 8

Similarly, the energy sector is vulnerable. Storms often force oil rigs and refineries to shut down temporarily. Chevron, for example, evacuated personnel at several Gulf of Mexico oil rigs in anticipation of Hurricane Milton. Potentially driving up energy costs nationwide.

National Impact

The economic impact of hurricanes often reverberates throughout the country. Hurricanes can negatively affect Gross Domestic Product (GDP). Particularly when they hit heavily populated or economically important regions. In 2005, the trio of storms—Katrina, Rita, and Wilma—lowered national GDP growth.

If Hurricane Milton’s damage exceeds $200 billion, the impact on third-quarter GDP could be significant. This is especially concerning because the storm comes right after Hurricane Helene. Helene has already affected states that contribute nearly 13% of the U.S. GDP.9

A Natural Disaster to Your Retirement

Increased Debt Burden

The cost of rebuilding after a hurricane is another financial burden that can last for years. Rebuilding infrastructure, homes, and businesses requires massive investments that can drive up public debt and insurance premiums.

Disaster relief is often classified as “emergency” spending. Therefore, it can circumvent normal budget caps and add directly to the national debt. It is rarely offset by cuts elsewhere in the budget. Between 2012 and 2021, Congress spent more than $400 billion outside discretionary spending caps on emergency relief. And this cost is projected to increase due to changing climate conditions. Relief further burdens the $35 trillion national debt. And in turn, threatens higher taxes and cuts to Social Security and Medicare. 10

Insurance Costs

The cost of insurance in disaster-prone areas is skyrocketing. Premiums have risen by over 30% since 2020, with storm-prone areas seeing hikes up to 50% or more. Some major insurance companies have even stopped issuing new policies in hurricane-prone states like Florida.11

Increased Retiree Risks

For retirees, the financial risks of hurricanes can be particularly devastating. Many retirees move to states like Florida, Texas, and North Carolina. The very same areas that are in the path of hurricanes. Beyond the potential for property damage, hurricanes disrupt local economies, leading to rising costs for essentials like food, utilities, and insurance. These price hikes, combined with market volatility during and after a storm, can erode retirement savings. Additionally, if retirees need to tap into their savings earlier than planned to cover emergency expenses, they may face tax penalties and fees, further depleting their funds.

Conclusion

As hurricanes become more frequent and severe, understanding their economic impact is crucial. From massive property damage to lost jobs and ruined businesses, the financial toll of hurricanes is far-reaching. For those nearing or in retirement, the risks are even greater. In the aftermath of a natural disaster, when markets are volatile and inflation risks increase, holding a portion of your savings in physical gold can offer peace of mind and financial security. A Gold IRA can provide long term savings protection against the increasing number of disasters. Contact us today at 800-462-0071 to learn more.


Notes
1. https://www.climate.gov/news-features/blogs/beyond-data/2022-us-billion-dollar-weather-and-climate-disasters-historical
2. https://www.climate.gov/news-features/blogs/beyond-data/2022-us-billion-dollar-weather-and-climate-disasters-historical
3. https://www.investopedia.com/natural-disasters-impact-on-retirement-8704241
4. https://blog.implan.com/hurricane-season-2024#:~:text=The%202024%20hurricane%20season%20poses,job%20creation%20and%20economic%20growth.
5. https://licensing.visualcapitalist.com/wp-content/uploads/2024/10/Cost-of-Hurricanes_02-web.jpg
6. https://www.barrons.com/articles/hurricane-milton-economy-jobs-gdp-2c975ee3
7. https://www.pbs.org/newshour/show/hurricane-katrina-job-losses
8. https://citrusindustry.net/2022/10/28/hurricane-ian-citrus-damages-could-hit-675-million/
9. https://www.barrons.com/articles/hurricane-milton-economy-jobs-gdp-2c975ee3
10. https://www.romney.senate.gov/romney-braun-reintroduce-legislation-to-require-congress-to-budget-for-natural-disasters
11. https://www.eenews.net/articles/not-just-the-coastal-areas-insurers-hike-premiums-everywhere/

Crises Expose Cracks in Economy

Crises Expose Cracks in Economy

  • A combination of crises is exposing the fragility of the American economy
  • A port strike, Middle East war, and commercial real estate collapse could reignite inflation
  • Growing global uncertainty surrounding the future health of the U.S. economy is sending gold prices to record highs

Crises Expose Economic Fragility

A confluence of crises is exposing just how fragile the U.S. economy is. These vulnerabilities could lead to serious long-term consequences. As geopolitical tensions rise, industries struggle, and inflation simmers, the economy may not be equipped to withstand the mounting pressures. These challenges threaten to destabilize markets and shake consumer confidence. Serious questions are arising about how best to protect your financial future.

Port Strike and the Inflation Threat

One such challenge is the threat of a massive dockworkers’ strike. It could further disrupt supply chains and reignite inflation. The International Longshoremen’s Association represents workers from 14 major ports along the U.S. East and Gulf Coasts. They have already initiated walkouts at ports handling over 68% of the country’s imports. This disruption could potentially cost the U.S. economy between $4.5 billion and $7.5 billion per day.1

The strike threatens to reverse that progress the Federal Reserve has made against inflation. The ripple effects could mirror past crises. During a similar strike in 1977, inflation jumped from 0.3% to 0.5% within a month. It set back years of economic stabilization. “Increased shipping rates and transportation expenses will eventually flow into consumer prices, undermining the progress made on inflation,” said Matt Colyar, an economist at Moody’s Analytics. A similar scenario now could force the Fed to rethink its current path of interest rate cuts.2

Crises Expose Cracks in Economy

Middle East Conflict and Oil Prices

The escalation of tensions in the Middle East adds another layer of instability. Particularly in global oil markets. Recent clashes between Israel and Iran have driven up oil prices by over 5%. That is the largest increase in nearly a year. With oil prices rising, the cost of goods, transportation, and services will inevitably follow suit. Inflationary concerns will intensify. Both businesses and consumers will feel the strain.

As geopolitical risks grow, investor confidence is faltering. The Financial Times summed up the sentiment of an economic panel at the UN General Assembly. They said, “The US is not an anchor for stability, but rather a risk to be hedged against. “3

Commercial Real Estate Collapse

On the home front, the commercial real estate (CRE) sector continues to implode. Office vacancies continue to swell. Mortgage defaults are skyrocketing. The delinquency rate for office mortgages spiked to 8.4% in September. The highest since the Great Recession. The retail and lodging sectors are also seeing rising delinquency rates. Brick-and-mortar stores are struggling to compete with e-commerce and hotels face lower demand.4

Crises Expose Cracks in Economy5

The structural issues in these sectors go beyond interest rates. “We are seeing systemic weaknesses in office and retail that cannot be fixed by rate cuts,” said a report by Trepp, a firm that tracks CMBS data. The ongoing struggles in the commercial real estate market can ignite a banking crisis that wrecks the rest of the economy.6

The U.S. Becoming an Emerging Market?

All these factors are contributing to a growing sense of uncertainty about the future of the U.S. economy. Mark Rosenberg is co-head of the research firm GeoQuant. He warned that the U.S. is displaying characteristics typically associated with emerging markets. “The U.S. has become full of unpredictability—politically, socially, and economically.” Rosenberg noted that institutional instability and social polarization are making the U.S. resemble historically volatile nations like Russia, Turkey, or South Africa.7

The U.S. is no longer seen as the stable economic anchor it once was, with rising debt levels, political gridlock, and the risk of social unrest. Some governments and businesses are distancing themselves from reliance on American markets and technology. For example, European corporations like SAP and the Port of Hamburg have shifted away from U.S. technology platforms over concerns about “digital sovereignty” and the reliability of U.S. policies.

Conclusion

As the cracks in the economy continue to widen, one thing is becoming increasingly clear: uncertainty is jeopardizing future savings and investments. Inflation risks, rising debt, and political instability are shaking the financial system. Now may be the time to consider gold as a safe haven. Gold has long been regarded as a reliable store of value in times of crisis. Physical precious metals held in a Gold IRA can protect your portfolio from a degraded American economy. Contact us today at 800-462-0071 to learn more.


Notes
1. https://www.investopedia.com/us-dockworkers-strike-begins-what-it-means-for-the-economy-8721616
2. https://www.investopedia.com/us-dockworkers-strike-begins-what-it-means-for-the-economy-8721616
3. https://www.ft.com/content/5f83a3fc-74e6-4b00-a3cd-aa9a81bb21a7
4. https://wolfstreet.com/2024/09/30/cre-mess-not-letting-up-cmbs-delinquency-rates-jump-in-september-as-office-retail-and-lodging-deteriorate-further/
5. https://wolfstreet.com/2024/09/30/cre-mess-not-letting-up-cmbs-delinquency-rates-jump-in-september-as-office-retail-and-lodging-deteriorate-further/
6. https://wolfstreet.com/2024/09/30/cre-mess-not-letting-up-cmbs-delinquency-rates-jump-in-september-as-office-retail-and-lodging-deteriorate-further/
7. https://www.ft.com/content/5f83a3fc-74e6-4b00-a3cd-aa9a81bb21a7

As Dollar Fades, Gold Rises: How BRICS+ is Changing the Game

As Dollar Fades, Gold Rises: How BRICS+ is Changing the Game

  • The value of the dollar continues to decline as it is challenged by the prospect of new currencies
  • Shifting to a multi-polar global economy with a BRICS+ currency could have devastating effects on the dollar and the US
  • You can defend and potentially grow your portfolio with a tax-advantaged Gold IRA.

Decline of the Dollar

As the dollar is rapidly losing value, the BRICS+ alliance is aiming to challenge its position as the world’s reserve currency. According to the Federal Reserve, the U.S. dollar has lost 97% of its purchasing power since 1913, leaving only 3% of its original value. What cost $1 in 1913 would now cost around $30. The global shift away from the dollar is positioning gold as the ultimate winner in this economic transformation. Owning physical precious metals offers a way to safeguard your finances from the consequences of this changing economic landscape.1

Lynette Zang is CEO of Zang Enterprises. She stated that the dollar’s 3% purchasing power in 2024 could turn to zero in 2025. Zang pointed to the FRED’s chart showing the Purchasing Power of the Consumer Dollar in U.S. City Average, stating that even the Federal Reserve tells you the greenback can approach zero. Hyperinflation and job losses could result from such a drop.

“I believe with all my heart and everything that I know that we’ve already begun the transition to hyperinflation,” Zang said. “We’re going to see more borrowing, more money printing, more inflation because they have not killed that beast that they created and continue to create,” she stated.2

Growing BRICS+ Challenge

The BRICS+ Alliance began with four nations – Brazil, Russia, India, and China. South Africa then joined to add the ‘S’. Four additional countries joined in January 2024 with 24 others informally expressing interest in joining. And now another 23 countries applied to join before the BRICS+ alliance summit in October.

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As Dollar Fades, Gold Rises: How BRICS+ is Changing the Game3

The countries are all emerging economies from the ‘Global South’ that are eager to flee dollar dominance. They want to defend against a dollar that has been weaponized by sanctions. The alliance members also want to fortify their own economic interests as the world shifts from a single superpower, the US, to a more multi-polar world.

According to the Atlantic Council’s Dollar Dominance Meter, the global share of U.S. dollar reserves has fallen since 2002, the first full year of the BRICS alliance. Until recently, nearly 100 percent of oil trading was conducted in U.S. dollars; however, in 2023 one-fifth of oil trades were reportedly made using non-U.S. dollar currencies. The undermining of the petrodollar erodes one of the pillars of dollar support. 4

BRICS+ Summit

The next BRICS summit will take place in Russia on October 22nd. The summit agenda will focus on accelerating de-dollarization. The alliance is primed to announce a de-dollarization roadmap. There is speculation that they will unveil key developments in ditching the dollar for trade and reserves.

A new report states that the bloc is “expected to introduce a multicurrency platform along with a roadmap for a gold-backed BRICS trading currency.”

As Dollar Fades, Gold Rises: How BRICS+ is Changing the Game

Among the expected announcements is the launch of a new BRICS Pay system. It would provide an alternative to SWIFT, a cross-border payment platform dominated by US dollars. Russia was barred from SWIFT after its Ukraine invasion. The new system will use local ‘digital dollars’ to simplify and speed up trade for members, free from Western influence.

There is even more anxiety surrounding the potential creation of a BRICS currency. Preparing for such a launch might explain why BRICS countries have been stockpiling gold reserves at a record pace in recent years. If it happens, not only would trade between members accelerate, but it will also effectively eliminate the need for the U.S. dollar on a global scale.

The ramifications of such a demand loss could be catastrophic to the U.S. economy. It would also weaken U.S. global influence and the standing of the dollar as the global reserve currency. According to the Atlantic Council, the U.S. dollar is used in approximately 88 percent of currency exchanges, and 59 percent of all foreign currency reserves held by central banks. That may all come to an end. Especially if a BRICS currency sparks the launch of other competing currencies. 5

Devalued Dollar, BRICS+, and Gold

The devalued dollar and the growing strength of the BRICS+ may give gold strong tailwinds. A devalued dollar leads to higher gold prices because when the dollar weakens, it takes more dollars to buy the same amount of gold, making gold more expensive.

And if a BRICS+ currency is backed by gold, as suggested by Putin, the demand for gold would surge, driving its price higher. As of now, the BRICS+ nations account for more than 20 percent of all the gold held in the world’s central banks. Russian, India, and China rank in the top 10 for central bank gold holdings. They are perfectly positioned to capitalize on a new gold-backed currency.

Conclusion

The world is experiencing a major economic shift in real time, with the dominance of the dollar fading as challengers like the BRICS+ alliance emerge. The full impact of the global economy moving toward a multi-currency system is still unknown, but the decline of the dollar is clearly linked to the rise of these new currencies. This change is accelerating, making it crucial to act now before it’s too late to safeguard your dollar-based savings. Gold is expected to reach record highs as part of this shift, and you can benefit by moving a portion of your portfolio into a tax-advantaged Gold IRA. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://money.visualcapitalist.com/buying-power-us-dollar-century/
2. https://www.kitco.com/news/article/2024-09-20/transition-hyperinflation-has-already-begun-feds-own-charts-show-dollars
3. https://asiatimes.com/2024/09/bric-by-bric-de-dollarization-only-a-matter-of-time/
4. https://www.nasdaq.com/articles/how-would-new-brics-currency-affect-us-dollar-updated-2024
5. https://www.nasdaq.com/articles/how-would-new-brics-currency-affect-us-dollar-updated-2024

Fed’s Bold Rate Cut: A Signal of Deepening Economic Fears

Fed’s Bold Rate Cut: A Signal of Deepening Economic Fears

  • The Federal Reserve cut interest rates for the first time in 4 years by 50 bps
  • There is concern the outsize interest rate cut is an indicator of deeper economic problems
  • Analysts are taking the large rate cut as a sign to move into defensive safe haven assets, like physical gold or silver

Outsize Rate Cut Sparks Concern

The Federal Reserve sent shockwaves through financial markets with its first rate cut in four years. They slashed interest rates by a striking 0.5 percentage points. This aggressive move, twice the size of a typical rate cut, goes beyond a mere attempt to stimulate growth. It signals a much more profound concern within the central bank about the state of the U.S. economy. By taking this bold step, the Fed appears to be bracing for more than just a ‘soft landing’. Instead, it hints at underlying fears of a severe downturn, potentially even a looming recession.1

Reading Between the Lines: Fear of Recession

Rate cuts are often seen as tools to spur economic activity. They can encourage borrowing, spending, and investment by making money cheaper. However, the magnitude of this cut shifts the narrative from economic support to economic survival.

The size of the rate cut has raised concerns about what the Fed sees on the horizon. While the central bank has refrained from explicitly stating its fear of a recession, its actions speak volumes. In times of economic uncertainty, a modest rate cut is often employed to maintain momentum and confidence.

Fed’s Bold Rate Cut: A Signal of Deepening Economic Fears

By contrast, a half-percentage-point reduction could have other implications. The Fed may be worried about more than just a temporary slowdown. Issues like an overheated stock market and an explosive debt crisis pose existential economic problems. Without this larger intervention, the situation could deteriorate rapidly.

“Bond King” Jeff Gundlach stated that the interest rate cuts are too little, too late. “We are in a recession already,” according to him. 2

Several economic indicators have been flashing warning signs for months. Growth has been sluggish. Job cut announcements climbed 193% over the last month. Inflation has remained persistently above the Fed’s 2% target. And global economic uncertainties have been mounting. The U.S. manufacturing sector shrank for the 11th time in the past 12 months, indicating a decline in overall production and demand. Consumer confidence has weakened, as has business investment. All these factors could have contributed to a cautious outlook from the Fed and the need for more dramatic action.3

The Market’s Mixed Reaction

The markets initially responded to the rate cut with enthusiasm. Stocks surged as investors welcomed the prospect of cheaper borrowing costs and a more accommodative monetary policy. However, this euphoria was short-lived. As the implications of the Fed’s decision sank in, a sense of unease began to permeate the markets. The initial 400-point gain was lost by the end of the day.

Broader Implications Across Sectors

The ramifications of the Fed’s decision are expected to ripple through various sectors of the economy. On one hand, lower interest rates can provide a boost to industries such as housing and consumer spending. Mortgage rates often decline in tandem with Fed rate cuts. This can potentially spur home-buying activity. Similarly, consumers might be more inclined to take on debt for big-ticket purchases like cars and appliances. Increased consumer spending can support retail and manufacturing sectors.

However, the flip side of this scenario is the psychological impact on businesses and consumers. When the central bank takes such a dramatic step, it can be interpreted as a sign that all is not well. This perception can lead to a self-fulfilling prophecy. Businesses may cut back on investments and hiring. Consumers can tighten their belts in anticipation of tougher times ahead. And with the era of ultra-low mortgages unlikely to return, the housing market can stall. If this sentiment takes hold, it could deepen the very economic weakness the Fed is trying to prevent.

Chris Rupkey is the Chief Economist at FWDBONDS. He stated, “some investors might be nervous and wondering what the Fed sees and what they do not. The last two times the Fed cut interest rates the first time they did it by 50 bps as well, but it was an emergency inter-meeting cut because the outlook had darkened. There were recessions in fact.”4

Historically, the economy doesn’t do well after an initial 50-point cut. On Jan 3rd, 2001, the S&P 500 fell ~39% over the next 448 days. Unemployment rose another 2.1%. And then on September 18,2007, the S&P 500 fell ~54% over the next 372 days. And unemployment rose another 5.3%. 5

Moreover, the Fed’s aggressive rate cuts carry the risk of reigniting inflation. By making money cheaper to borrow, the central bank could inadvertently fuel rising prices, especially if demand rebounds unevenly. With economic growth already sluggish, this scenario creates the risk of stagflation—a situation where inflation rises even as economic growth stagnates. Stagflation can be particularly damaging because it limits the Fed’s policy options. If inflation picks up while growth remains weak, the Fed could find itself in a bind, struggling to balance the dual threats of rising prices and anemic economic activity.

Fed’s Bold Rate Cut: A Signal of Deepening Economic Fears6

Conclusion: The Shadow of Uncertainty

The Federal Reserve’s decision to cut interest rates by 0.5 percentage points can be seen as more than just a monetary policy adjustment. It may be a statement of concern. Is the central bank aware of economic risks that we aren’t? The fear of a recession looms larger now than it did before the Fed’s announcement. Businesses, consumers, and investors are left to grapple with what might come next. You can protect your portfolio with safe haven assets like physical gold or silver, especially in a tax-advantaged Gold IRA. Contact us today at 800-462-0071 to learn how.

 
Notes:
1. https://www.cnbc.com/2024/09/17/stock-market-today-live-updates.html
2. https://www.businessinsider.com/fed-rate-cuts-recession-layoffs-job-market-outlook-jeff-gundlach-2024-9
3. https://www.businessinsider.com/fed-rate-cuts-recession-layoffs-job-market-outlook-jeff-gundlach-2024-9
4. https://finance.yahoo.com/news/live/stock-market-today-federal-reserve-cuts-interest-rates-by-half-a-percentage-point-stocks-rise-180501561.html
5. https://x.com/tiffany_varty/status/1828137294370611632
6. https://pwonlyias.com/current-affairs/us-fed-rate-cut/

Trump v Harris: Winner – Gold

Trump v Harris: Winner - Gold

  • Gold has been posting record breaking returns in 2024, outperforming the S&P 500
  • Analysts think that whether Trump or Harris wins, the price of gold will go up
  • Now is opportune time to secure your funds with physical gold before the election

Gold’s Rise to Continue

As the 2024 U.S. presidential election looms, financial markets are bracing for shifts in fiscal and economic policy. But one asset is expected to benefit no matter who wins—gold. The precious metal has already demonstrated remarkable performance this year. It has risen about 21% year-to-date and reaching an all-time high of $2,531.70 in August. Gold has outperformed the S&P 500 index, which is up around 15%. With a combination of economic factors and political uncertainty on the horizon, gold is well-positioned to continue its upward trend.1

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Trump v Harris: Winner - Gold2

Bullish Factors Supporting Gold’s Rise

Several key factors are already fueling gold’s bullish trajectory. First, the anticipated cuts in interest rates are making gold a more attractive investment. Lower rates reduce the appeal of yield-bearing assets like bonds. This drives more investors toward safe-haven assets like gold. Commerzbank Research predicts as many as six rate cuts between now and mid-2025, further boosting gold’s potential.3

Another major driver is the strong demand from central banks. In 2023, global central banks purchased over 1,000 tons of gold as they sought to diversify away from the U.S. dollar. The People’s Bank of China has led the charge, engaging in an 18-month buying spree. According to the World Gold Council, 2024 began with 290 tons of net gold purchases in the first quarter alone. That is one of the strongest quarters on record.4

Geopolitical risks are also playing a role. The ongoing war between Russia and Ukraine, along with the Middle East conflict, is fueling instability. They are adding to the unpredictability in global markets.

A looming recession and potential market crash are fueling gold demand as well. “Black Swan” investor Mark Spitznagel sees a recession hitting. It will occur after the biggest making bubble “we’ve ever seen” bursts. 5

Trump v Harris: Winner - Gold


How Each Candidate Could Push Gold Prices Higher

The election itself is adding to economic uncertainty, and, in turn, the demand for safe haven gold. There is intense unease over the unknown direction of future fiscal policy.

Whoever wins is expected to bring policies that can push gold prices higher. Harris and Trump both hold the potential to blow up deficits and reignite inflation.

A Harris win in likely to mean a shift to more progressive policies. They could include higher business taxes and increased regulation. She is also expected to continue, or increase, the high-spending approach of the Biden administration. The U.S. government has already surpassed borrowing $2 trillion annually, and that figure is expected to reach $2.8 trillion by 2034. A Harris administration has little chance of reducing the deficit. As a result, the dollar would weaken, and growth would stagnate. Both of which historically lead to higher gold prices.6

If Donald Trump returns to office, his policies could also fuel a bullish gold market. Trump is expected to push for tax cuts, but without credible plans to reduce spending, these cuts could exacerbate the deficit. Additionally, Trump has a history of engaging in trade wars. They could reignite geopolitical tensions and uncertainties in the global market. His tariff threats may speed up the pace of de-dollarization. Countries would seek to protect their economies from a weaponized dollar. Furthermore, if Trump pressures the Federal Reserve to maintain low interest rates, the dollar could weaken. And as weak dollar tends to result in higher gold prices.

Conclusion

Both candidates are expected to have policies that could inflate deficits and create economic or geopolitical uncertainty. Gold stands out as a reliable hedge against this instability. As Naira Metrics notes, investors looking to protect their funds would do well to avoid risky assets. And gold offers a safe alternative.7

Ole Hansen is the Head of Commodity Strategy at Saxo Bank. He sums up gold’s future outlook. “Investors are likely to continue viewing gold as a hedge against the uncertainties posed by both economic and policy forces.” Over the past decade, gold has provided an average annual return of 8.4% in U.S. dollars, consistently outpacing inflation. TD Securities predicts gold can hit $2,700 per ounce in the next few quarters. American Precious Metals Exchange forecasts gold could break $3,000 in 2025. 8

As we move closer to the 2024 election, the case for gold only strengthens. Whether Kamala Harris or Donald Trump wins, both candidates will bring policies that could further drive demand for gold. To learn more about how physical precious metals can protect your retirement, especially when held in a Gold IRA, contact us today at 800-461-0071.

 
Notes
1. https://fortune.com/2024/08/17/gold-price-outlook-wall-street-forecasts-3000-fed-rate-cuts-central-banks-recession/
2. https://www.telegraph.co.uk/business/2024/08/28/gold-soaring-on-fears-economic-catastrophe-kamala-harris/?ICID=continue_without_subscribing_reg_first
3. https://fortune.com/2024/08/17/gold-price-outlook-wall-street-forecasts-3000-fed-rate-cuts-central-banks-recession/
4. https://fortune.com/2024/08/17/gold-price-outlook-wall-street-forecasts-3000-fed-rate-cuts-central-banks-recession/
5. https://fortune.com/2024/08/17/gold-price-outlook-wall-street-forecasts-3000-fed-rate-cuts-central-banks-recession/
6. https://www.telegraph.co.uk/business/2024/08/28/gold-soaring-on-fears-economic-catastrophe-kamala-harris/
7. https://nairametrics.com/2024/09/06/gold-stocks-and-dollar-octas-guide-to-navigating-market-volatility-during-election-time/
8. https://www.kitco.com/news/article/2024-09-10/trump-vs-harris-gold-wins-either-way-saxo-banks-hansen

Commercial Real Estate – The ‘Ticking Time Bomb’

Commercial Real Estate - The 'Ticking Time Bomb'

  • With almost $1 trillion in debt due this year, commercial real estate is being called a ‘ticking time bomb’
  • The primary holders of CRE debt, more than 200 regional banks are in danger of collapse
  • Physical precious metals, especially those held in a Gold IRA, can protect the value of your savings from the impact of a commercial real estate meltdown

Commercial Real Estate Risk Skyrockets

Commercial real estate, once seen as the bedrock of the American economy, is now being called a “ticking time bomb” as almost $1 trillion in loans come due this year. The collapse of the CRE sector would send shockwaves through the economy that could devastate savings.

The market is still reeling from record low vacancy rates and devalued buildings. Lower valuations make it harder for landlords to borrow money. Banks and property owners are now accepting that their buildings may never recover their pre-pandemic value. Fitch Ratings said office values have dropped 35% from their peak. Capital Economics predicted prices could drop another 20%. 1

Faced with this reality, office buildings are being sold off at staggering losses. One midtown Manhattan office building sold at a 97.5% discount in July.2

According to the Mortgage Bankers Association, about $930 billion in commercial real estate loans will come due this year. Commercial mortgages are typically set up with a balloon payment. This way, property owners only must pay the interest before the major payment comes due at the end of the loan. Typically, when rates were low, owners would just refinance and push the balloon payment down the road. But with interest rates being held higher for longer, that option is no longer feasible. Commercial real estate lending declined 47% last year. 3

At the same time, operating expenses have gone up dramatically. Owners are choosing to simply not pay back their loans instead of saving their properties with their own cash. About $95 billion of the US properties are in distress or at risk of becoming so. The office sector accounted for two-thirds of newly delinquent loans. In July, $1.9 billion in office loans became newly delinquent. 4

Commercial Real Estate - The 'Ticking Time Bomb'5

Scott Rechler is the CEO of New York landlord RXR. He called the crisis a slow moving storm and said, “So at some point or another, the day of reckoning needs to come,” he added. “I think it’s here.”6

Rate Cuts Too Little, Too Late

The signal for lower interest rates may be too little, too late for the drowning commercial real estate sector. Fed Chair Powel says commercial real estate risk “will be with us for some time, probably for years.”

“Excessive exposure to commercial real estate remains a ticking time bomb within the banking system,” said Rep. Ritchie Torres (D-N.Y.). “An interest rate cut might ease the symptoms, but it will not cure the disease itself. ‘Extend and pretend’ can delay a crisis but it cannot make it magically disappear.”7

There is bipartisan support to make it easier to convert office buildings into housing. Solve two problems at once. However, the process is slow and expensive and not all commercial spaces can be converted.

Commercial Real Estate - The 'Ticking Time Bomb'


Bond & Bank Worries

A secondary crisis is looming in the bond market. Many of the floating-rate loans were bundled into the $80 billion commercial real estate bonds and sold to investors. This may raise a systemic risk for banks issuing the bonds.

John Devaney is the CEO of the United Capital Markets hedge fund. He has the dubious distinction of being one of Time Magazine’s 25 people to blame for the 2008 mortgage crisis. He stated commercial real estate is a “slow moving train wreck” and the commercial bond market is in shambles. “The CMBS market is actually a disaster right now. Many things are unfolding right now and the bond pricing is telling us things are very, very bad,” the United Capital CEO said. He warned the collapse could ruin large downtown area that depend on tax revenue from office spaces. 8

The demise of the sector spells trouble for small and medium-sized commercial banks. They are being classified as “stressed.” Small banks have CRE loans values exceeding 158% of their risk-based capital. Midsize banks are at 228%. 9

A recent report stated that 282 of 4,000 US banks are on the verge of collapse. This is due to the double hit of maturing CRE loans and losses resulting from high interest rates. The same things that caused the catastrophic failures of Silicon Valley Bank, Signature Bank and First Republic Bank. Higher for longer interest rates have exposed the vulnerability of banks worldwide according to the International Monetary Fund.

Banking System Risks

If multiple banks try to raise capital at the same time, it could destabilize the banking system, similar to what happened in March 2023. Market volatility might lead investors to demand higher yields, driving up borrowing costs. A new recession could worsen the situation, causing widespread asset devaluation. Significant losses in commercial real estate loans could leave hundreds of small and midsize banks undercapitalized, with larger banks also at risk.

Conclusion

The growing risk factors facing commercial real estate are raising questions about how much longer the sector can go on. Insiders agree that a reckoning is on the horizon, the results of which could be catastrophic and ripple throughout the entire economy. The time to prepare is before the crisis becomes a reality. Physical precious metals, especially those held in a Gold IRA, can protect the value of your savings from the impact of a commercial real estate meltdown. Contact us today at 800-462-0071 to learn more about how to secure your funds.

Notes:
1. https://markets.businessinsider.com/news/bonds/real-estate-crash-commercial-property-prices-investing-mortgage-backed-securities-2024-8
2. https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
3. https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
4. https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
5. https://www.linkedin.com/posts/james-w-stuff_delinquency-office-loans-activity-7228905623340376064-eF_g/
6. https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
7. https://www.politico.com/news/2024/09/02/office-property-values-fed-00174697
8. https://markets.businessinsider.com/news/bonds/real-estate-crash-commercial-property-prices-investing-mortgage-backed-securities-2024-8
9. https://www.noradarealestate.com/blog/commercial-real-estate-crash-could-trigger-economic-tsunami/

Future of the National Debt Looks Bleak

Future of the National Debt Looks Bleak

  • At over $35 trillion and growing, the national debt presents a clear and present danger to the United States
  • An economic research report stated that the US is approaching a point where no amount of taxes or spending cuts can prevent a crisis
  • Safe haven assets, like physical gold and silver, held in a Gold IRA can shield the value of your portfolio from the effects of massive national debt

National Debt, and Danger, Grow Unchecked

As the Presidential election heats up, there is one issue both parties would like to avoid – the national debt. Having reached astronomical heights, and growing, the debt presents a very real danger to the US economy. With a political system that may be structurally unable to prevent a crisis, Americans should prepare now before consequences hit.

By the Numbers

The US national debt currently sits at $35.26 trillion. That is around $104,000 per citizen. Meanwhile, US Federal tax revenue is at $5 trillion. This model obviously cannot be sustained for much longer. We’re growing the debt more than twice as fast as we’re growing the economy. To grasp the enormity of the debt, there is about $450 trillion combined in the world. Our debt accounts for 7% of all the money in existence. 1

The interest on the debt is already more than military spending. Over the next decade, interest is expected to double to $1.7 trillion. That is roughly the equivalent of adding another Medicare program. 2

Future of the National Debt Looks Bleak3

Prior to 2000, annual deficits were turning into surpluses. The national debt shrank over three years to around $5.6 trillion in 2000. Alan Greenspan went as far to say the debt could be paid off if current policies continued. We had a debt-to-GDP ratio of 55 percent. 4

Today, at $35 trillion, the debt-to-GDP ratio is 122% – and rising. Aggressive government spending is raising the debt $1 trillion every 100 days. For context, the debt-to-GDP ratio during World War 2 was 106% of GDP. 5

Future of the Debt

The University of Pennsylvania found both Trump and Harris proposals would increase the national debt. Trump’s would raise the national debt by 9.3%. Harris’ would add 4.4%. The debt would expand more under Trump because he would make his 2017 tax cuts permanent. He would also cut taxes on corporate income and Social Security benefits. Harris would let the cuts expire and raise taxes on businesses and high-income individuals. At the same time, those taxes would be offset by more government spending. 6

No matter who wins, the US is headed for $50 trillion in debt by 2034.

Systemic Failure on the Debt

Impediments to preventing a debt crisis may be built into the system. A study by Arnold Ventures states that the US budget process itself has broken. There has always been political brinkmanship, fighting until the very last possible minute. But now, instead of finding workable solutions, Congress simply signs off on raising the debt limit without accountability from either party. The Democrats get more spending, and the Republicans get more tax cuts. Both sticking the American people with the bill.

Future of the National Debt Looks Bleak

Vanishing Debt Safeguards

Some economists say the unique role of the US in the world economy protects it from the consequences of runaway debt. They call it ‘exorbitant privilege’. A study found the US can sustain debt around 22% of GDP. That’s because the dollar is the dominant currency for international trade and reserve currency. Other countries will continue buying US debt to avoid sinking their economies. In addition, the US gets significant leeway from seigniorage revenues – printing dollars for next to nothing, and then selling them to other nations for market value. 7

The de-dollarization movement could totally undermine this debt protection. China’s yuan or a new gold-back BRICS+ currency could rival the dollar. If US debt reaches extremely high levels, rival currencies may look like the safer choice. The US debt will become a greater liability when we can no longer ‘force’ other nations to finance our debt. Interest rates would skyrocket and send the country into a debt-doom spiral.

Economists Smetters and Gokhale concluded that if US debt held by the public exceeds 200 percent of GDP, no amount of tax hikes or spending cuts can prevent default. We’ll either have to say we will not pay back all our debt, or else inflate it away. Both of which would have massive negative consequences for American workers and consumers. They estimate that the US will reach this point in about 20 years.8

Solutions

To fix the problem, entitlements will need to be slashed, taxes will need to be raised, as will the retirement age. Paying off the debt will be a painful legacy passed to future generations.

Some economists are trying to find hopeful solutions. World Bank Group President David Malpass explained tackling the deficit will raise stocks prices, increase employment, and lift wages. To get past a broken Congress, he says begin spending cuts with “small popular one, and then another small one, and then a big popular one, and then a tough one. Build credibility.”9

Conclusion

Come January 25th, the debt ceiling will need to be lifted again. Whoever is President on that day is unlikely to take measures that reduce the national debt. Instead, we’ll hurtle closer to “most predictable crisis” – one that can ruin the country’s, and every American’s, financial future. That’s why protecting your portfolio now with safe haven assets like physical gold and silver is a good idea. A Gold IRA can safeguard your savings from the consequences of runaway national debt. Call us today at 800-462-0071 to learn how.


Notes:
1. https://ktrh.iheart.com/featured/houston-texas-news/content/2024-08-27-the-national-debt-now-accounts-for-seven-percent-of-all-global-money/
2. https://www.barrons.com/articles/national-debt-federal-deficit-trump-harris-6c5c6740
3. https://www.forbes.com/sites/dougcriscitello/2024/08/27/will-the-us-government-be-there-when-you-need-it-most/
4. https://ktrh.iheart.com/featured/houston-texas-news/content/2024-08-27-the-national-debt-now-accounts-for-seven-percent-of-all-global-money/
5. https://www.barrons.com/articles/national-debt-federal-deficit-trump-harris-6c5c6740
6. https://www.newsmax.com/newsfront/donald-trump-kamala-harris-trillions/2024/08/28/id/1178179/
7. https://cepr.org/voxeu/columns/exorbitant-privilege-and-sustainability-us-public-debt
8. https://www.vox.com/policy/367278/us-national-debt-gdp-government-inflation-solutions-recession
9. https://www.barrons.com/articles/national-debt-federal-deficit-trump-harris-6c5c6740


Gold Hits Another Record High: More Gains Predicted

Gold's Untapped Potential: A Safe Haven Amid Financial Uncertainty

  • Gold broke another all-time high, hitting $2,571 an ounce
  • Demand is likely to increase due to Fed rate cuts, a weaker dollar, and geopolitical uncertainty
  • Buying gold now in a tax advantaged Gold IRA can lead to long-term gains

Gold Breaks New All-Time-High

Gold has been on an impressive run since the end of 2022, and it shows no signs of slowing down. On August 20th, gold reached yet another record high. Currently, gold is outperforming stocks, bonds, and even Bitcoin. Now entering its 25th year of a bull market, analysts believe that gold’s upward trend is far from over. The continuing surge is driven by a mix of global demand and economic factors.1

For the first time ever, the value of a single gold bar has crossed the $1 million mark. Of course, that single gold bar is the 400 troy ounce London Good Delivery bar. The bar is the standard unit of trade in major international gold markets. The price of gold is up more than 20% this year, trading at a record high above $2,500 an ounce, with a peak of $2,571.2

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Gold's Untapped Potential: A Safe Haven Amid Financial Uncertainty3

Gold Demand Sources

The demand for gold is global, but the reasons for this surge vary. In India, there’s a significant increase in demand due to traditional holiday buying and a recent cut in import duties. The chief executive of the London Bullion Market Association said, “It’s really a question of how quickly they can get metal into the country, in terms of the number of flights.”4

De-dollarization

Meanwhile, demand also increased on an accelerating de-dollarization movement. The BRICS+ nations are increasing their gold reserves as they reduce their dollar holdings. They are also developing a gold-backed currency to challenge dollar supremacy. Central banks, especially the People’s Bank of China, continue to make record gold purchases. Soaring prices over the past two years have largely been fueled by China.

Geopolitics and Interest Rates

Americans are also contributing to demand. Dangerous geopolitical conflicts and the upcoming presidential election are increasing the desire for financial stability. Gold is considered a safe-haven asset, retaining its value during times of uncertainty. John Reade, chief market strategist at the World Gold Council, commented. He said, “What we have seen is investors and speculators in the West starting to return to the gold market. This has been fast money that has been driving gold.”5

Interest rates are also playing a crucial role in the gold market. Western investors largely sat on the sidelines during gold’s 20-month rally. They are now returning with the prospect of interest rate cuts. Institutional investors and bullish hedge funds are boosting gold prices. As are opaque purchases by family offices who are concerned about a devalued dollar.

Investors are betting that further interest rate cuts by the Federal Reserve will push gold prices even higher. Gold tends to rise when interest rates go down. Lower rates reduce the opportunity cost of holding non-yielding assets like gold. This makes it more attractive to investors. In addition, gold is internationally denominated in dollars. So, when the dollar goes down, gold costs more.

National Debt

However, safe haven demand isn’t just being driven by geopolitics and monetary policy. The U.S. national debt is now at $35 trillion and growing. It is eroding confidence in the dollar’s value and the creditworthiness of the United States. Investors are looking for security beyond once bedrock-solid T-bills.

Gold's Untapped Potential: A Safe Haven Amid Financial Uncertainty

Future Forecasts

Looking ahead, the gold rally appears far from over. Commerzbank expects gold prices to consolidate within the $2,500 range over the next few months. But they don’t expect them to stay static. “We expect the gold price to continue rising in the first half of 2025 due to further Fed interest rate cuts, a U.S. inflation rate that remains above target, and a weaker U.S. dollar,” said the bank’s precious metals analysts. The head of commodities at Citi Research believes that gold could reach $3,000 an ounce by mid-2025.6

Conclusion

The bottom line is that gold’s trend remains bullish as we move into September 2024. Even though aggressive bull markets rarely move in straight lines, the quarter-of-a-century trend in gold suggests that any dip could be a chance to add more gold to a diversified portfolio. Since 1999, buying every dip in gold has proven to be a strategy that yields positive returns. Those returns are amplified in a tax-advantaged Gold IRA. To learn more about how you can benefit from gold’s ascent, contact us today at 800-462-0071.


Notes
1. https://seekingalpha.com/article/4715944-gld-gold-shows-no-sign-of-slowing-its-ascent
2. https://www.benzinga.com/analyst-ratings/analyst-color/24/08/40457722/gold-is-getting-its-moment-in-the-sun-and-experts-say-the-record-high-prices-could-
3. https://www.reuters.com/markets/commodities/gold-steady-near-record-high-investors-seek-more-fed-cues-2024-08-20/
4. https://www.ft.com/content/03ed761e-ccf9-4494-b1f8-1cab8313a07f
5. https://www.ft.com/content/03ed761e-ccf9-4494-b1f8-1cab8313a07f
6. https://www.kitco.com/news/article/2024-08-20/commerzbank-sees-gold-prices-consolidating-around-2500-year-end

October Surprise – A New BRICS+ Currency

October Surprise - A New BRICS+ Currency.

  • Gold prices have been reaching all-time-highs primarily due to purchases from BRICS+ central banks.
  • In October, the BRICS+ de-dollarization agenda expands as they plan to announce information regarding the launch of their own gold-backed currency.
  • Owning physical precious metals in a Gold IRA can not only protect the value of your savings over the long term, but it could also potentially grow them.

BRICS+ and the Rise of Gold

Gold’s surge to a record high of $2,480 on July 17th underscores its enduring status as a safe haven amid escalating global tensions and economic uncertainty. But the primary driver of demand isn’t coming from the investment sector. Instead, this rise is largely driven by the BRICS+ alliance. Central banks from BRICS+ nations have been on an unprecedented gold buying spree in their pursuit of de-dollarization. This October, they may be announcing the launch of a new currency to rival the dollar – setting off a global shift that could have a significant impact on the US economy and your savings.

Who Are the BRICS+?

The BRICS+ alliance was originally an economic consortium of five major emerging economies—Brazil, Russia, India, China, and South Africa. It has been steadily increasing its numbers and influence on the global stage. Founded in 2006, the group’s primary objective is to counterbalance Western-dominated financial and political institutions. With a combined population of over 3 billion people and some of the world’s largest and fastest-growing economies, BRICS represents a significant bloc in international affairs.

BRICS+ and Gold

As retail investment in gold declined, BRICS+ purchasing has been pushing the price of gold to new levels. The World Gold Council reported that BRICS+ has been the largest buyers of gold since 2022.

Data from the World Gold Council show the largest buyer was the People’s Bank of China. Except for a pause this spring, China has been expanding its gold reserves every single month since October ’22. Russia is also aggressively bulking up its gold reserves. Gold now represents 29% of their total reserves, up from 11% just six years ago.1

October Surprise - A New BRICS+ Currency.2

Gold and the Weaponized Dollar

Vahan Roth is executive director at Swissgrams AG. His latest analysis posits that gold’s rise is a reaction to the weaponization of the U.S. dollar.

“The world reserve currency…can and will be used as an offensive weapon in geopolitical conflicts,” he wrote. “That same weapon that has been wielded against Russia could be deployed against any other adversary.”3

In response, the BRICS+ alliance is pushing back against the U.S. They want to be able to defend against a weaponized dollar by shifting reserves to gold.

BRICS+ Currency

The BRICS+ path to de-dollarization doesn’t stop with protecting their reserves with gold. They are making significant strides in launching a new currency. The currency would be backed by gold and act as a counter to the U.S. dollar. The nine-member alliance is planning a big announcement about the currency at its October summit.

Some financial experts believe that a gold-backed currency could spell the “beginning of the end” for the US dollar. Developing countries could distance themselves from the dollar, and US influence, by embracing the currency for reserves and cross-border transactions. 4

October Surprise - A New BRICS+ Currency.

A gold-backed currency would provide a stable alternative. It could reduce the reliance of BRICS+ countries on the U.S. dollar and protect their economies from dollar fluctuations.

The rise of a competing currency is coming at a time when faith is being lost in the greenback. A gold-backed currency would provide a tangible basis for value and stability. In contrast, the U.S. dollar, like most modern currencies, is a fiat currency, meaning it is not backed by any physical commodity. The U.S.’s growing national debt recently reached $34.4 trillion. Concerns are rising about the long-term stability of the dollar. These concerns are among the reasons the BRICS+ are seeking more secure alternatives.

A New Way to Pay

The BRICS+ are already creating a system to rival the SWIFT payment system. The SWIFT payments system enables financial transactions between banks and other financial institutions. Russia was excluded from the SWIFT system after it invaded Ukraine. This effectively isolated Russian financial institutions from global markets. Russia’s exclusion reinforced the need for a financial system outside of Western control.

“The financial agenda of BRICS has a main initiative for building a new economic reality…Creating our own financial messaging system for the BRICS countries, similar to SWIFT,” Alexander Babakov, Deputy Chairman of the Russian State Duma, said.5

Implications

The shift away from U.S. dollar dominance erodes America’s default higher standing in the world economy. Destabilizing this position could hurt foreign exchange rates and international lending practices. Reduced demand for dollars could lead to a decline in the currency’s value. The devalued dollar can lead to hyper-inflation, leading to higher prices for imported goods and everyday purchases. In addition, the shift could expose and worsen existing vulnerabilities in the U.S. banking sector, heralding a new crisis.

Conclusion

We are moving to a multipolar financial world with multiple currencies and monetary systems. The era of U.S. dominance looks to be ending. For the BRICS+ nations, these initiatives are not just about economic pragmatism; they are also about asserting greater influence on the global stage. Consequently, the falling value of the dollar would severely impact the worth of dollar-denominated investments like stocks and bonds. In comparison, the price of gold is likely to increase as it used to back a growing currency. That’s why owning physical precious metals in a Gold IRA can not only protect the value of your savings over the long term, but it could also potentially grow them. To learn more, contact American Hartford Gold at 800-462-0071.

Notes:
1. https://www.kitco.com/news/article/2024-07-24/brics-driving-new-gold-rush-china-russia-gold-backed-currency-would-mark
2. https://www.centarzlata.com/wp-content/uploads/2023/08/BRICS-zlato-graf.jpg
3. https://www.kitco.com/news/article/2024-07-24/brics-driving-new-gold-rush-china-russia-gold-backed-currency-would-mark
4. https://watcher.guru/news/brics-gold-backed-currency-is-beginning-of-the-end-for-us-dollar
5. https://www.tekedia.com/brics-announces-plan-to-ditch-swift-create-alternative-financial-system/