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• China claims to have discovered the largest gold vein in the world.
• The discovery strengthens China’s de-dollarization ambitions.
• Americans can defend against the economic impact of lost U.S. supremacy with physical gold held in a Gold IRA.

China Claims World’s Largest Gold Vein

China has struck gold—literally—and the shockwaves could shake the global economy. China recently announced the discovery of a massive deposit of high-quality gold ore. It is estimated to possess 1,000 tons of gold worth $83 billion. Making it the largest known gold deposit in the world. The discovery has the potential to affect everything from China’s ambitions to your retirement account. ¹

Gold prices surged on the announcement. And the potential new massive supply raised questions about gold’s continuing upswing. Yet, the World Gold Council (WGC) was quick to doubt the find. They say the claim is ‘aspirational’. And much more drilling would be needed to turn this into a reserve. In addition, the WGC says Chinese mineral reporting standards don’t match global frameworks. “Even if proven, such a deposit would take years to bring into production,” they concluded. ²

Impact on Gold Market

Further analysis deflates concerns about oversupply. The global gold market produces 3,600 tons a year. It would see little impact from a mine producing 15 to 30 tons a year (roughly 1% of supply).³

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China is already the world’s largest gold producer but is facing a decline in output. This a problem for them because Chinese gold consumption surpasses their mining capacity.
China’s gold jewelry demand rose 10% last year, while bar and coin investment rose 28%.

To get an idea of the size of the Chinese market, in the last two years, overseas purchases were about equal to a third of the gold held by the U.S. Federal Reserve. To meet demand, they need significant imports from Australia and South Africa. The newly discovered Wangu vein could reverse that trend and extend their reserves.⁵

China’s Gold Ambitions

China’s gold strategy is shrouded in mystery. The People’s Bank of China paused its gold buying spree earlier this year. They bought record-setting amounts of gold for 17 straight months. Now, analysis shows that China has continued buying gold secretly on the London Bullion market through bullion banks. The secret buying exploded after sanctions froze Russia assets in 2022 after the Ukraine invasion.

Analysts theorize that gold plays an essential role in China’s economic and political ambitions. Acquiring gold would fortify an economy in the grips of several financial crises. Greater gold reserves enhance China’s economic leverage and resource security. It also furthers their goal to usurp America’s role of global economic leader. Gold allows them to accelerate de-dollarization. Turning the renmibi into the dominant currency for international trade and foreign reserves.

Gold to Continue to Climb

Up 30% year-to-date, gold prices are spiking. Western investment is only now catching up to the East’s. Demand is driven by inflation fears, global conflicts, national debt concerns, and lowering interest rates. Yet, China’s insatiable demand underpins it all. And experts believe there is still more room to grow due to limited investment options for Chinese.

Managing director of Hong Kong based Precious Metals Insights said, “The weight of money available under these circumstances for an asset like gold… is pretty considerable. There isn’t much alternative in China. With exchange controls and capital controls, you can’t just look at other markets to put your money into.”⁶

Conclusion

China is known for playing the long game – focusing on steady, long-term growth in all aspects of national power. They aim to create a multipolar world where it stands as an equal or superior to the United States. This new gold bonanza feeds into that vision, assuming they can develop it.

Instead of lowering gold prices by opening this new reserve to the world, China may very well keep it for domestic consumption. If their projected demand continues, a perfect storm for gold prices will form. And, with newfound Chinese resource security, an increased threat of de-dollarization along with it.

Americans can protect against the impact of this Chinese lucky strike. They can move into gold and away from dollar denominated assets put at risk by de-dollarization and a more expansive, aggressive China. Call American Hartford Gold today at 800-462-0071 to learn how a Gold IRA can protect your retirement funds.

Notes:
1. https://www.livescience.com/planet-earth/geology/supergiant-gold-deposit-discovered-in-china-is-one-of-the-largest-on-earth-and-is-worth-more-than-usd80-billion
2. https://www.mining.com/chinas-super-giant-gold-discovery-claim-sounds-aspirational-wgc-expert-says/
3. https://www.mining.com/chinas-super-giant-gold-discovery-claim-sounds-aspirational-wgc-expert-says/
4. https://mining.com.au/massive-china-discovery-could-change-global-gold-market/
5. https://fortune.com/2024/04/21/gold-price-outlook-record-high-china-demand-consumers-investors-pboc/
6. https://mining.com.au/massive-china-discovery-could-change-global-gold-market/

• Find peace of mind this holiday season by adding physical gold and silver to your portfolio.
• Gold demand is increasing as numerous factors are increasing economic uncertainty.
• Contact American Hartford Gold today to learn how physical precious metals, especially in a Gold IRA, can safeguard your financial future.

Peace of Mind This Season

As we enter the holiday season, many of us are focused on expressing thanks for the good things in our lives and wishing for peace and happiness in the year ahead. This season reminds us of the value of connection, family, and traditions, even as we continue to face uncertainty in the world around us. As the year draws to a close, it’s an ideal moment to consider ways to safeguard our future, especially our financial security.

One such option that offers peace of mind in uncertain times is adding physical gold and silver to your portfolio. These precious metals have long been seen as a reliable hedge against economic instability, inflation, and other financial risks.

Gold: Symbolic and Practical

Gold is integral to many holiday traditions, especially as a gift. Jewelry makes up about 50% of global gold sales. Gold jewelry is cherished not only for its beauty but also for its enduring value. Yet there is far more to gold than just jewelry; it can be the foundation for a secure financial future.

Gold can play a vital role in building a balanced and diversified retirement portfolio. It offers a level of stability that other assets may not. By diversifying with gold, you can reduce risk and protect your wealth from the unpredictable swings of the stock market.

The importance of gold is no secret. Gold prices have surged more than 70% since 2020. Experts predict it could surpass $3,000 per ounce in the coming year. The past few months, gold has been on a record-breaking streak, recently crossing the $2,700 an ounce mark.¹

Why Gold

And while we hope for a joyous season, it is still plagued by uncertainty. Here are some of the concerns that have institutions and individuals turning to gold for security.

Inflation: After a brief respite, inflation is ticking back up. Cumulative inflation has reached 22% since 2020. Different sectors have experienced varying levels of inflation, with transportation seeing the highest at 34.71%, followed by food and beverages (22.68%) and housing costs (22.64%). ³

With inflationary pressures continuing due to factors like government spending, global conflicts, and supply shortages, gold remains a trusted hedge against inflation. Since it holds intrinsic value, gold typically appreciates when inflation erodes the purchasing power of the dollar.

National Debt: The U.S. national debt has now surpassed $36 trillion, contributing to fears of economic instability. As JPMorgan Chase CEO Jamie Dimon has stated, public debt is “the most predictable crisis” facing the American economy. In this environment, gold is considered a safe-haven asset that can protect your wealth against the devaluation of the dollar caused by rising debt. ⁴

Stock Market Volatility: Many analysts believe stocks are overvalued and that a market correction is imminent. When stocks fall, retirement accounts such as 401(k)s and IRAs are often hit hard. Unlike stocks, gold maintains its value and tends to move in the opposite direction of equities, making it a valuable asset for diversifying your portfolio.

Recession Fears: The possibility of a recession looms large, driven by aggressive interest rate hikes by the Federal Reserve and the economic slowdown that follows. A recession can lead to increased unemployment, stagnating wages, and declining business activity. During these times, gold often performs well as investors seek stability amidst uncertainty.

Economic Risks from Policy Changes: Proposed policies from political leaders like Donald Trump could further exacerbate inflation. His proposed tax cuts and corporate incentives, if implemented, may stimulate short-term economic growth. But they may also increase the national deficit. Additionally, his plans to implement tariffs on goods could push up prices across many sectors. Inflation could rise as a result of both. As prices rise, gold becomes an even more attractive option for protecting your wealth.

In addition, geopolitical risks, including trade wars and potential tariffs, could further strain economies. Creating even more volatility in financial markets. As such, gold is being sought after to hedge against such risks.

Conclusion

As you celebrate this holiday season, we wish you joy, peace, and prosperity in the year ahead. While we’re all focused on the people and traditions that bring us comfort, it’s also a good time to reflect on securing your financial well-being. Give yourself the gift of peace of mind this season—learn more about how gold, especially in a Gold IRA, can help safeguard your future. Call American Hartford Gold today at 800-462-0071.

Notes:
1. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
2. https://www.gold.org/goldhub/research/gold-mid-year-outlook-2024
3. https://www.in2013dollars.com/us/inflation/2020?amount=52000
4. https://finance.yahoo.com/news/jamie-dimon-believes-u-public-110537564.html

• Goldman Sachs advises ‘Go for Gold’ – predicting it will break $3,000 an ounce in 2025.
• Record breaking demand is fueled by central bank demand, interest rate cuts, inflation, and global conflict.
• Physical precious metals held in a Gold IRA offer long term wealth protection and potential growth.

‘Go for Gold’ says Goldman Sachs

Russia’s recent threat of nuclear war caused gold prices to spike. But that is just the latest reason for gold to surge., Gold has been a standout performer in 2024. It recently hit a major milestone. A standard 400-ounce gold bar is now valued at $1 million. And the precious metal’s rally is far from over. Goldman Sachs is now telling clients to “Go for gold.” The investment giant predicts that gold prices could reach $3,000 per ounce by the end of 2025. Gold AND silver both offer a hedge against economic uncertainty and a potentially lucrative growth opportunity.¹

Goldman Sachs’ Bullish Case for Gold

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Goldman Sachs has laid out several compelling reasons why gold is set to climb even higher in the coming years:

Central Bank Demand

Global central banks continue to buy gold as part of a diversification strategy away from the U.S. dollar. While the pace of buying has slowed slightly, demand remains near record levels. This trend is partly driven by growing U.S. debt, which makes Treasury bonds less appealing. Central banks see gold as a more stable and reliable reserve asset in the face of rising debt levels.

Federal Reserve Rate Cuts

Gold prices tend to thrive during periods of monetary easing. And with unemployment on the rise, more rate cuts are likely on the horizon. Goldman Sachs analysts believe lower rates will help stabilize gold prices above $2,600 per ounce. The cuts set the stage for continued growth.

Furthermore, potential political interference may undermine the independence of the Federal Reserve. As a result, confidence in the U.S. dollar could falter, driving investors toward gold.

A Hedge Against Inflation

Inflationary pressures are re-emerging. The two major measures of inflation both rose in October. And they are poised to go up. Trump’s proposed tariffs may result in higher prices. Economists estimate they could cost the average U.S. household $2,600 annually. The tariffs would likely result in a rise in trade tensions, which would also help inflate gold prices.³

Geopolitical Uncertainty

Ongoing global conflicts are likely to support gold demand. Especially as the wars in Ukraine and the Middle East grow hotter. The threat of global economic instability is driving investors to take a “flight to safety.” As gold proves itself to be a stable store of value in times of crisis.

The Technical Case for Gold

Gold’s bullish momentum isn’t just about economic fundamentals—it’s supported by strong technical indicators:

Historical Patterns: Since 1980, gold has gone through several bull and bear cycles. Key recovery periods like 2004, 2011, and 2024 highlight its resilience.

Breakouts Across Markets: Gold has reached all-time highs in major currencies, such as the Swiss Franc. This signals broad-based strength.

Silver/Gold Ratio Stability: Unlike past gold peaks, the silver/gold ratio isn’t spiking. An indicator that market sentiment isn’t overheated.

Relative Strength vs. Stocks: Gold’s strength against regional stock indices highlights its potential for long-term outperformance. And for the first time in 12 years, gold is outperforming emerging-market stocks.

As Goldman Sachs notes, inflation and geopolitical concerns are likely to keep gold on an upward trajectory. They recognize it as a critical portfolio diversifier.

Silver Is Also on the Rise

While gold has captured much of the spotlight, silver is quietly making its own headlines. According to the Silver Institute, silver demand is expected to exceed 1.2 billion ounces in 2024. A new record. Meanwhile, significant supply constraints are leaving a deficit of over 200 million ounces.⁴

Why Silver Is Gaining Momentum

Silver’s unique combination of investment appeal and industrial demand makes it a standout option:

Hedge Against Inflation and Instability: Like gold, silver serves as a hedge against inflation, currency devaluation, and systemic financial risks.

Dual Demand: Silver’s role as both a safe-haven asset and a key industrial component in the green economy has driven its price higher. Since March 2020, silver has outperformed many other commodities. That’s due to spiking demand for renewable energy technologies and electronics.

Interest Rate Impact: A recent report highlights silver’s historical performance during interest rate cuts.

“Monetary easing cycles are generally positive for the Silver Price,” the report states. “Since 1981, silver has risen in 6 out of the 7 easing cycles for an average gain of 16.8%.”⁵

A Supercycle in the Making: Analysts believe silver may be entering a supercycle, with price upswings lasting 10 to 20 years. While short-term volatility is possible, the overall trend is expected to remain upward.

Supply Constraints: The growing deficit in the silver market—driven by surging demand and limited supply—adds further support to prices. With industrial demand rising, silver’s long-term prospects remain strong.

Conclusion

Gold prices pulled back slightly after the election. The World Gold Council called the drop a buying opportunity:

“The gold price consolidation following the orderly U.S. election—flushing speculative positioning from near all-time highs—provides an attractive entry point to buy gold,” the council noted in its 2025 commodities outlook.⁶

Gold and silver are both positioned for sustained growth. Institutions and individuals are seeking refuge from inflation, geopolitical tensions, and economic uncertainty. The case for protecting your wealth with precious metals has never been stronger. And a Gold IRA from American Hartford Gold offers long-term security against financial turmoil. Call 800-462-0071 now to learn how you can secure your financial future with precious metals.

Notes:
1. https://www.kitco.com/news/article/2024-11-19/go-gold-says-goldman-sachs-prices-still-track-hit-3000-year-end-2025
2. https://finance.yahoo.com/news/goldman-says-gold-central-banks-023249823.html
3. https://fortune.com/2024/11/18/donald-trump-gold-trade-tariffs-inflation-national-debt-goldman-sachs/
4. https://www.kitco.com/news/article/2024-11-19/multitude-factors-are-aligning-silver-supercycle-silver-institute
5. https://www.kitco.com/news/article/2024-11-19/multitude-factors-are-aligning-silver-supercycle-silver-institute
6. https://fortune.com/2024/11/18/donald-trump-gold-trade-tariffs-inflation-national-debt-goldman-sachs/

• The Federal Reserve cut interest rates in November based on slowing inflation and a weakening job market
• Conflict between the Fed and Donald Trump is making the future of rate cuts uncertain
• Physical precious metals can preserve fund value no matter which side’s policy prevails

Trump, The Fed & Uncertainty

After holding interest rates near record highs for two years, the Fed issued their second cut since September. Motivated by recession fears, the cut is meant to help spur a lagging job market. But the Fed’s future policy could be thrown into turmoil as it collides with President-elect Trump’s bold economic agenda. The heightening uncertainty has insiders taking refuge in safe haven assets like precious precious metals.

Rate Cut

The Fed’s dual mandate of maximum employment and price stability has them walking a tightrope. With inflation dropping from its record high 9.1%, the Federal Reserve cut interest rates by a quarter of a point in November. However, high interest rates still have the economy in a “strangle hold” posing a risk to the job market.¹

Data shows the risks of the job market collapsing and inflation reigniting are the same now. There were 7.4 million job openings in September. Down considerably from 9.3 million that time last year. Unemployment is also up from last year – raising fears of recession.

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Future Cuts

Several more rate cuts were expected for 2025. The number of cuts is now uncertain due to potential impacts from Trumps proposals. His plans for tax cuts, deregulation, and tariffs could cause inflation to rise and deficits to grow. In response, the Fed may not only stop cutting rates. They may feel it necessary to raise them again. Nomura Bank expects just one more cut in 2025 if Trump quickly implements his plans.

Trump vs the Fed

Despite economic data, Powell acknowledged that Americans have a poor view on the economy due the “lingering trauma of high inflation.” It’s that lingering trauma that helped re-elect Donald Trump.

Officially, the Federal Reserve decision making is independent of the government. Its independence is to protect it from short term political decision making. In the Fed’s own words, it was “designed to carry out its responsibilities without interference or control from the vested interests inherent in electoral politics, fiscal policymaking, and private banking.”³

Alan Greenspan, a five-term Fed chair, said in 1996. “The clear political preference for lower interest rates would unleash inflationary forces, inflicting severe damage on our economy.”⁴

Trump does not hide that he is no fan of the Fed. During his first term, he publicly attacked Powell after raising rates to fight inflation. Trump said about Powell: “He was supposed to be a low-interest-rate guy. It turned out he’s not. … I’m very unhappy with the Fed because Obama had zero interest rates.” Interestingly enough, it was Trump who first nominated Powell. ⁵

Control of Monetary Policy

Trump wants a voice in the central bank’s interest rate decisions. he said: “I think I’m better than most people would be in that position. I think I have the right to say, ‘I think you should go up or down a little bit.’ I don’t think I should be allowed to order it, but I think I have the right to put in comments as to whether or not interest rates should go up or down.”⁶

To that end, Trump maintains that he has ” the right to remove him [Powell].” When asked if Trump has the power to fire him, Powell said no. And demoting him is not permitted under law.

Powell said in the short term, the election won’t impact decision making. He implied another expected cut in December is likely to go ahead. That decision is still dependent on unemployment and inflation data.

Impact of Interference

If political pressure starts to tamper with the Federal Reserve’s independence, the ripple effect could extend far beyond Wall Street. Experts warn that undermining the Fed’s credibility would shake global financial stability. The concern isn’t just about interference from political figures. It’s about the risk of eroding trust in the Fed’s ability to manage inflation. If inflation expectations rise, the Fed might be forced to take drastic measures to regain control. Potentially plunging the economy into a deeper downturn. At worst, such moves could make the U.S. appear less like a stable economy and more like an unpredictable autocracy. The value of the dollar and goods at the whim of political agendas.

Defense Against Uncertainty

The only certainty about the tug of war between the President and the Federal Reserve is heightened uncertainty. To defend against that uncertainty, financial experts are looking to gold.

Historically, gold has held its value through economic and political upheavals. This year alone, gold prices have surged by over 30%. By 2025, some expect they could reach as high as $3,000 per ounce.

Gold is positioned well who wins control for monetary policy. Gold can preserve purchasing power against Trump’s inflationary pressures. Gold can also help shield against losses resulting from a recession triggered by the Fed being forced to raise rates. And a Gold IRA offers long term protection if these adversarial forces drag the economy into a prolonged downturn. To learn how to protect you retirement before it is too late, contact us today at 800-462-0071.

Notes
1. https://www.cnn.com/2024/11/07/economy/fed-meeting-rates-november/index.html
2. https://www.theguardian.com/business/2024/nov/07/federal-reserve-interest-rates-lowered
3. https://www.marketplace.org/2024/10/28/fed-independence-federal-reserve-politics-trump-harris-election/
4. https://www.marketplace.org/2024/10/28/fed-independence-federal-reserve-politics-trump-harris-election/
5. https://www.marketplace.org/2024/10/28/fed-independence-federal-reserve-politics-trump-harris-election/
6. https://www.marketplace.org/2024/10/28/fed-independence-federal-reserve-politics-trump-harris-election/

• 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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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

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

• 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+ 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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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 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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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 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

• 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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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

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/

• 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

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

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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

• 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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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.”

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

• 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.

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.

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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/

• 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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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

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