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

Bank Risks Increase

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

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

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

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

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

More Banks at Risk

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

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

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

The FDIC Sees Risk

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

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

Wall Street Weighs In

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

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

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

Conclusion

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

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

 

 

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

Looming Stock Market Crash

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

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

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

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Warnings from Wall Street

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

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

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

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

Market Indicators

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

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

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

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

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

Conclusion

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

Notes:

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

 

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

Silver Prices on the Rise

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

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

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

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

The “Silver Squeeze”

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

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

Investor Demand – $50/oz silver?

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

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

Gold/Silver Ratio

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

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

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

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

Silver in Uncertain Times

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

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

Conclusion

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

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

 

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

Debt Skyrockets

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

Credit Card Delinquencies Hit New High

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

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

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

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

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

So Goes the Nation

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

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

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

The Government Non-Response

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

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

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

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

Conclusion

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

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

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

Gold Prices Consolidate at New Highs

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

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

Right now, gold is consolidating around $2,400 an ounce – a new record weekly close for the precious metal. Gold’s rally to this price is breaking long held fundamental beliefs. It resisted downward forces like high interest rates and a strong dollar. Gold is benefiting from overall increased demand. That demand is fueled by the geopolitical conflicts in Ukraine and the Middle East. Gold is also fulfilling safe haven demand for investors as stocks struggle to maintain their near record highs. Central banks and individuals are rapidly acquiring gold as a hedge against inflation as it creeps upwards again. ¹

Go to Gold

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

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

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

Gold & Interest Rates

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

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

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

Future Prices

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

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

Conclusion

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

Notes:

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

 

 

• Experts fear China’s gold buying binge is a prelude to an attack on Taiwan
• A Chinese attack on Taiwan is predicted to send the price of gold skyrocketing, hitting up to $5,000 an ounce
• Central banks and individuals are flocking to physical gold to secure their wealth during this time of political chaos

China Gold Buying: Prelude to Taiwan Attack?

Having learned a lesson from Russia, China has been sanction-proofing their economy for two years. Now, China’s leader Xi may be ready to achieve the long-sought goal of annexing Taiwan. A Chinese attack on Taiwan would shake the global economy and send gold prices soaring.

Experts say China has been preparing for a major action. They have been building trade relationships in the ‘Global South’, stocking up on oil and gas, and most notably, buying gold on a colossal scale.

In the last 17 months, Chinese gold reserves, that we know about, soared 17%. They now have 73 million ounces of gold currently worth $170 billion. They have also raised their foreign exchange reserves to their highest level since 2015. This is looking to some analysts as a war chest meant to defend against sanctions brought on in response to an attack on Taiwan.¹

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Once thought impossible, a Chinese attack on Taiwan is looking more probable. Xi himself ordered his armed forces to be “ready to invade Taiwan by 2027.”³

Xi is thought to be encouraged by a few factors. He may have perceived Western weakness and disarray on Ukraine. China can capitalize on Iran increasing global instability. Thanks to Western sanctions, China has access abundant cheap energy from Russia. They have also secured supply chains and built-up strategic reserves of vital resources.

“Xi seems to have studied the sanctions playbook the West used against Russia over Ukraine and subsequently initiated long-lead protective measures to batten down the hatches of China’s economy to resist similar pressure,” Michael Studeman, former head of the Office of Naval Intelligence. Studeman continued, “”Xi likely knows attempting to assimilate Taiwan would lead to much fiercer global resistance and harsher whole-of-society repercussions that would likely last years. And he intends to ready China to endure them.”⁴

The move on Taiwan is looked at as potentially more than a territorial dispute. For the Chinese, it could be the dawn of a new world order with China at the top. Militarily, China is building up its nuclear arsenal, missile capabilities, and space-based weapons. The military expansion is backed by its massive espionage and cyber campaigns. Overall, China is positioning itself to usurp the role of global superpower.

Economic Attack

China’s attack may not be limited to Taiwan. Economists are interpreting China’s actions as a prelude to a global economic assault.

“China is preparing for something major. That seems increasingly obvious judging from the stockpiling of important resources. Could it be that they are preparing a major one-off devaluation of the CNY?” said Andreas Steno Larsen, CEO of Steno Research.⁵

Devaluing their currency is widely described as a “nuclear option” by economists. It could trigger worldwide consequences. The action would make their goods drastically cheaper, escalating a trade war with the US. The US is already accusing China of flooding markets with cheap goods. By hoarding gold and oil, China can hedge against the negative effects of a large devaluation.

Effect on Gold

Gold may skyrocket if China invades Taiwan. China’s gold demand may continue increasing if they are planning a Taiwan attack. They’d do this to support their economy and defend against sanctions. China holds a massive $3.25 trillion in foreign currency that could quickly be converted into gold. They could effectively corner the gold market at a time and date of their choosing. Doing so would send the price of gold soaring. An attack would send investors around the world rushing to protect their wealth with gold against volatility. This too would force the price of gold skyward. Analysts predict an attack on Taiwan could result in gold hitting $3,000 an ounce and going as high as $5,000 an ounce.⁶

Conclusion

Gold has been consistently breaking price records. The last 18 months have seen the greatest net gold bullion purchases by central banks worldwide since 1950. BRICS nations are leaning into gold to further their de-dollarization agenda. The Middle East conflict is sending people flocking to safe haven assets like gold.

A Chinese attack on Taiwan could send gold prices to unheard of heights. In addition, the stock market is predicted to fall between 20 and 30%⁷ during the initial attack. Coupled with a trade war, the US economy could be stuck in a negative growth loop for years. This moment in time presents an opportunity to protect one’s retirement funds and potentially grow them with gold. A Gold IRA is designed to secure your nest egg from global instability and economic chaos. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.telegraph.co.uk/business/2024/05/01/xi-jinping-vast-gold-war-chest-enable-china-take-taiwan/
2. https://tradingeconomics.com/china/gold-reserves
3. https://www.telegraph.co.uk/business/2024/05/01/xi-jinping-vast-gold-war-chest-enable-china-take-taiwan/
4. https://www.newsweek.com/china-may-preparing-deploy-economic-nuclear-option-1894985
5. https://www.newsweek.com/china-may-preparing-deploy-economic-nuclear-option-1894985
6. https://seekingalpha.com/article/4635246-gold-may-skyrocket-if-china-invades-taiwan
7. https://seekingalpha.com/article/4635246-gold-may-skyrocket-if-china-invades-taiwan

• The IMF warned that the unprecedented US debt is a danger to the global economy
• Debt-fueled high interest rates in the US have severe negative consequences for developing nations
• Facing global economic repercussions, many Americans are turning to safe haven physical gold and silver to protect their wealth

IMF Warns About US Debt Danger

The International Monetary Fund has warned that the US national debt poses a significant risk to the global economy. Our massive government spending is overheating the economy, reigniting inflation, and raising global funding costs. The ramifications of which will cause instability and damage the economic security of those here and abroad.

The IMF pointed out that some countries are taking measures to reduce debt. The US is not among them. Instead, they said the US is one of four countries that needs to critically address the fundamental imbalance between spending and revenue. The others are China, Italy, and the UK. The US is expected to record a fiscal deficit that is more than triple the level of other advanced economies.

The rate at which the US is acquiring debt is accelerating. Or as the IMF put it, there were “large fiscal slippages” during 2023. Government spending exceeded revenue by 8.8% of GDP. That is more than double amount in 2022. ¹

That rate isn’t going to slow, especially with many elections this year, including a Presidential one. Public spending is likely to increase as leaders try to build support.

²

Here is a glimpse of the US Debt by the numbers:

2023 Government debt is 122% of annual GDP³
2024 US debt breaks $34 trillion on its way to $35 trillion
2029 Government debt projected to rise to 133.9% of annual GDP
2034 National debt projected to hit astonishing $54 trillion
2053 Government debt projected to rise to over 200% of annual GDP⁴
2053 US public debt estimated to be $70 trillion

Servicing and Selling the Debt

The cost to service the debt doubled from 2020 to 2023 to $659 billion a year. The government is spending more to service the debt than it does on housing, transport, and higher education. ⁵

The government is planning on selling another $386 billion of bonds in May. They are likely to continue selling debt at that pace throughout the year. Yet, markets are struggling to absorb all the new debt being issued. The reluctance comes from inflation worries, uncertain monetary policy, and the size of the debt. Risk premium, meaning how risky US debt looks, is growing.

To make the bonds more attractive, investors demand higher returns to hold US Treasuries.
The increased interest makes the debt more expensive. Rising rates in the US lead to matching rises in developing economies. Bond’s vulnerability to inflation and high interest rates is increasing financial instability. The IMF said that “This could lead to volatile financing conditions in other economies.”⁶

Even if the Fed cuts rates this year, US government funding costs may not fall by the same margin. The high cost of servicing the debt leaves less money for public services or dealing with emergencies like financial meltdowns, pandemics, or war.

Impact of Debt on the US

The resulting high interest rates needed to fund the debt seep through our economy. High interest rates make loans more expensive for businesses and individuals. This slows growth and depresses stock prices. In addition, high rates lead to more defaults, putting more stress on an already fragile banking system.

Fed Chair Powell signaled that rates could stay higher-for-longer due to inflation rising again. Cutting rates is becoming unlikely as debt-fueled inflation is making “the last mile” to the Fed’s 2% target harder to achieve.

A lack of rate cuts could spark a vicious debt spiral. The debt death spiral refers to a situation where the country’s increasing debt leads to higher interest rates. This in turn makes it more expensive to borrow money. As borrowing costs rise, the government must allocate more funds to debt servicing, leaving less money for essential services and investments. This cycle makes the debt burden worse with further borrowing and worsening financial instability. Until the cost to service the debt chokes out the government’s ability to provide any services at all.

Effect of US Debt on the World

So goes the US, so goes the world. Our higher interest rates due to debt affect the global economy. High US interest rates attract investors seeking better returns. As investors move their funds into US assets, demand for other currencies decreases. This causes their value to drop. To counteract this depreciation and prevent capital flight, other central banks raise their interest rates. Money becomes harder to access in other countries as a result, adding the same pressures on stocks and bonds.

In addition, many state debts are tied to US interest rates. As US rates rise, the cost of borrowing and debt burden worsens. Risks rise as economic fragilities are exposed. Already unstable economies can be driven into total meltdown by forces beyond their control.

Conclusion

The IMF presented a strong case on how the astronomical US debt endangers the entire global economy. Unfortunately, the debt is only going to grow exponentially larger. And the danger is going to grow with it. A worldwide economic crisis is brewing that could have long reaching, long lasting unforeseen consequences. That’s why many Americans are moving to protect their wealth by acquiring safe haven physical gold and silver that hold their value during economic upheaval. In particular, a Gold IRA can protect the long term value of retirement funds from the effects of runaway debt. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.wsj.com/economy/global/imf-warns-surge-in-u-s-china-debt-could-have-profound-impact-on-global-economy-c3758d81
2. https://www.cbo.gov/publication/58946
3. https://www.ceicdata.com/en/indicator/united-states/government-debt–of-nominal-gdp
4. https://www.foxbusiness.com/economy/imf-sounds-alarm-ballooning-us-national-debt-something-will-have-give
5. https://www.cnn.com/2024/04/17/economy/america-debt-interest-rates/index.html
6. https://www.wsj.com/economy/global/imf-warns-surge-in-u-s-china-debt-could-have-profound-impact-on-global-economy-c3758d81

• The conflict in the Middle East has broad global ramifications – including negative consequences for retirement savings
• The war can cause higher inflation, recession, and stock market volatility
• A Gold IRA can protect retirement funds from the consequences of Middle East war

Market Drops as Middle East War Escalates

The Dow posted its biggest weekly loss since March 2023 in the run up to the Iranian strike on Israel. The DJIA cemented its longest losing streak in 10 months. The market dropped on fears of growing escalation between the two countries. Now investors are anxiously awaiting Israel’s response to Iran’s launch of more than 300 missiles and drones at them. The conflict half a world away holds serious implications for retirement funds for several reasons.¹

Oil

Experts expect highly volatile oil trading soon. They are finding themselves in uncharted territory with a direct conflict between Iran and Israel. The Middle East accounts for roughly a third of global oil production. In addition, the Strait of Hormuz sees almost 20% of global oil supply and a significant amount of all shipping volumes. Iran’s geographic proximity to the channel poses a risk of immobilizing supply with a global impact.

The shifting alliances amongst OPEC producers is also adding to the uncertainty. Those nations are wavering between national interests against Iran and economic interests to keep oil prices stable. The managing director of Velandera Energy Partners said, “If Israel vows to respond back with greater force, or Iran basks in solidarity with the Arab neighbors, then there is a real potential for oil’s march to $100.” Chase Bank said oil could potentially hit $125 per barrel.²

Inflation reduces the purchasing power of retirees’ savings. Rising oil prices can increase inflation because it’s an essential part in the production and transportation of goods and services. When oil prices rise, businesses face higher energy costs. This often leads to increased production costs. These increased costs are commonly passed on to consumers. Higher prices result, contributing to inflation. Additionally, higher energy costs can lead to increased expenses for businesses. Economic downturns or recessions can result, negatively affecting investment returns and retirement savings.

Conditions aren’t exactly the same today as they were in the 1970s, but a bad historical precedent exists. During the 1973 oil crisis, sparked by the Yom Kippur War, the S&P 500 index dropped by nearly 50%. OPEC’s oil embargo led to quadrupled oil prices and an economic recession. Similarly, the 1979 energy crisis, triggered by political unrest in Iran, saw the S&P 500 index fall by over 27%. The drop reflected disruptions in oil supply and heightened economic uncertainty.³

Interest Rates

Rising Middle East tensions could cause the Federal Reserve to adopt a more cautious approach to cutting interest rates. Wall Street has pushed back expectations for an interest rate cut to September from March. But if high oil prices push up inflation, then those cuts are likely to get delayed further. The Fed has said they are making their decisions as data comes in. If inflation isn’t trending to their 2% goal, they won’t cut rates. There is already talk of no rate cuts this year as inflation has started increasing again.

Higher-for-longer interest rates can harm retirement funds by lowering the value of existing bonds and fixed-income investments, as newer bonds offer higher yields. Additionally, high rates can make borrowing more expensive. Thereby reducing consumer spending and potentially slowing economic growth, which can negatively affect investment returns in retirement portfolios.

Trader and investors must now factor in the higher threat of stagflation in the global economy with the Middle East crisis driving up inflation and slowing growth. They must do this at a time when fiscal policy and monetary measures are already losing their effectiveness in taming inflation.

Gold and Silver

⁴

The chaotic international crisis may present an opportunity to buy gold and silver at lower prices according to Peter Spina of goldseek.com. He believes a major market selloff could bleed over to precious metals. A selloff can cause investors to sell their precious metals holdings to cover their losses. The sudden influx of supply could create a temporary drop in prices.

But that drop wouldn’t last long. Gold prices rallied to yet another record high last Monday. Gold’s recent rapid price increase is predicted to only accelerate with the increased war tensions. Spina continued, “The gold price is reflecting all sorts of problems, risks, and now the fear-war premium will likely be added should there be no quick de-escalation to these very serious events in the Middle East.”⁵

Conclusion

The conflict in the Middle East is having broad global ramifications. Included in them is a potentially serious negative impact on retirement savings due to inflation, recession, and market volatility. Gold’s upward trajectory reflects a universal sprint towards to economic security. Before the war heats up more, now is a good time to learn how physical precious metals can protect the value of your nest egg. Contact American Hartford Gold at 800-462-0071 to find out how a Gold IRA can help secure your financial future.

Notes:

1. https://www.marketwatch.com/livecoverage/stock-market-today-dow-futures-climb-after-iran-attack-on-israel-causes-little-damage
2. https://www.marketwatch.com/livecoverage/iran-attacks-israel-live-coverage-of-events-and-markets-reaction
3. https://thehill.com/opinion/international/4270641-the-global-impacts-of-todays-war-in-israel-are-not-the-same-as-1973/#:~:text=The%20S%26P%20500%20index%20plunged,its%20low%20in%20September%201974.
4. https://www.americanhartfordgold.com/gold-price-charts/
5. https://www.marketwatch.com/livecoverage/iran-attacks-israel-live-coverage-of-events-and-markets-reaction

 

• Inflation continued to rise according to the most recent Labor Department Report 
• Inflation is eating away at the value of retirement plans, eroding more tan 10% of value during 2022 and 2023 
• Gold is proving itself a hedge against inflation and continues to break all-time highs 

Inflation Continues to Rise

The Labor Department’s most recent CPI report painted a grim picture. Higher than expected prices showed that inflation is more stubborn than thought. The stock market immediately dipped upon the news as hopes for interest rates cuts were dashed. Retirement savers are facing a precarious new reality as we seem to be entering a ‘no-landing’ state of permanent inflation.

Overall inflation and core inflation, with volatile food and energy costs removed, both remained well above the Fed’s 2% target. Headline CPI rose 3.5% from a year ago. That’s up considerably from February’s 3.2% rate. Core price inflation came in at 3.8%. Service prices were up 5.4% from last year. In effort to get a better picture of the economy, economists started the ‘supercore’ measurement. This new computation takes core services and subtracts housing. That number surged 7.2% at an annualized pace. ¹

²

Economists suspect the previous easing of inflation was due to falling oil prices. But gasoline prices rose again in March as OPEC+ extended supply cuts and the Middle East conflict grew.

Inflation and the Stock Market

Over the past few months, investors had high hopes for imminent rate cuts. The Fed had signaled the possibility of cutting interest rates three times this year. In January, the CME FedWatch Tool indicated a 73% chance of a 25-basis point rate cut by the Federal Reserve as early as March. This optimism fueled a stock market frenzy. With the release of this latest inflation report, that surge was brought to an abrupt halt.³

The Dow Jones Industrial Average fell more than 500 points. The Nasdaq and the S&P 500 also dropped. Tech stocks, including Microsoft, Amazon and Apple, were lower. The CME FedWatch Tool now show 78% of participants expect the Fed to hold rates steady in June. The markets are now hoping for a rate cut in September. Though there is now a possibility of no interest rate cuts this year – further stagnating the economy.⁴

Interest rates are also taking on a political overtone. Some economists point out that a well-timed cut could give a crucial boost to the economy when it comes voting time. Seema Shah is the chief global strategist at Principal Asset Management. She said, “Today’s crucial CPI print has likely sealed the fate for the June [Fed] meeting with a cut now very unlikely. Even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making.”⁵

Markets historically drop when interest rates are kept longer for higher. This is because it costs more for companies to borrow money and other investments may look better compared to stocks.

Inflation Impact

Continuing inflation is placing severe pressure on most US households. Prices have increased on everyday necessities. In the past few years, the cumulative consumer price index has increased a whopping 18.49%. ⁶

Lingering inflation is taking a heavy toll on retirement savings. The damage goes beyond falling portfolio value as stocks plummet. Warren Buffets said, “Inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to simply consume capital.”⁷

And the math bears it out. Let’s consider an IRA with $100,000 as an example. Just accounting for 8% inflation in 2022, and 4.1% in 2023, the account would have lost $11,772. More than 10% of your retirement savings would have vanished in two years. That money is going to continue disappearing as inflation remains elevated. In addition, higher-for-longer interest rates are likely to keep driving stock values down and increase the chance of recession.

Conclusion

So-called ‘sticky’ inflation presents a real threat to retirement savings. The economy is finding itself in a ‘no-landing’ situation. Continued growth and a tight labor market are working to prevent a decline in inflation. Meanwhile, the most aggressive interest rate hikes in decades haven’t stopped inflation. Instead, they have brought us to the brink of recession.

One stand out in this mess is gold. It is proving itself as a true hedge against inflation. As purchasing power continues its descent, the price of gold keeps breaking record highs. For those people who want to protect the value of their portfolios from the ravages of inflation, now is the time to investigate what gold can do for you. A Gold IRA is designed to maximize your protection from inflationary forces. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:

1. https://www.foxbusiness.com/economy/march-inflartion-report-another-month-hot-price-gains-expected
2. https://www.foxbusiness.com/economy/march-inflartion-report-another-month-hot-price-gains-expected
3. https://www.cbsnews.com/news/interest-rates-today-mortgage-goldman-sachs/
4. https://www.foxbusiness.com/markets/stocks-sink-after-hot-march-inflation-data
5. https://www.cnn.com/2024/04/10/markets/markets-fall-cpi-inflation-report/index.html
6. https://www.foxbusiness.com/economy/march-inflartion-report-another-month-hot-price-gains-expected
7.https://www.goodreads.com/author/quotes/756.Warren_Buffett?page=5#:~:text=the%20arithmetic%20makes%20it%20plain,ability%20to%20simply%20consume%20capital.

 

• The Congressional Budget Office warned of a severe national debt crisis
• A debt crisis can result in sky high inflation, a devalued dollar, record taxes, and deep cuts in government services like Social Security
• Americans are flocking to physical precious metals to protect the value of their retirement funds from the debt crisis.

Congressional Budget Office Warns of Debt Crisis

US government borrowing has hit unprecedented levels and threatens to leave “scars on our society and economy” for decades to come. The total US national debt is around $34.5 trillion. Forty years ago, it was “only” around $900 billion. Based on forecasts, the national debt will grow to an astonishing $54 trillion in the next decade. With uncontrolled debt potentially leading to sky high inflation, a worthless dollar, and reduced Social Security, Americans are turning to physical precious metals to protect their retirement funds.¹

The federal debt relative to gross domestic product will likely rise above World War 2 levels by 2029. Currently, the debt to GDP ratio is 99%. That is predicted to shoot up to 123% by 2034. And that’s the optimistic prediction. It could go as high as 134% in 2034 or 185% by 2050. The head of the independent Congressional Budget Office (CBO) warned the debt could trigger a damaging market reaction if something wasn’t done.²

³

Bloomberg Economics found that in 88% of a million simulations, the national debt is on an unsustainable path. A recent CBO report highlighted that skyrocketing debt combined with high interest rates means the country might not be able to afford crucial borrowing in the future.⁴

The costs of servicing the debt are anticipated to soar. It is likely to triple from approximately $475 billion in fiscal year 2022 to a remarkable $1.4 trillion by 2032. By 2053, interest payments are forecasted to surge to $5.4 trillion, surpassing the combined expenditure on essential programs like Social Security, Medicare, Medicaid, and other mandatory and discretionary spending. That’s factoring in spending on Medicare and other major health programs are projected to rise more than 40% in the next 30 years.⁵

Some economists try to say there is no crisis. They say that since the dollar is the world’s reserve currency, there will always be someone to who wants to buy our debt. But this may not hold true forever. The CBO continued to say that the uncontrolled debt could “erode confidence in the US dollar as the dominant international reserve currency.” Combined with the rising de-dollarization movement , the US may find itself unable to raise crucial funds in the future.⁶

The Government Accountability Office said that now is the time for Congress to address the issue. They said, ” The sooner actions are taken to change the long-term fiscal path, the less drastic they will need to be.”⁷

Conversely, the current lack of political will may result in the government needing to take extreme measures. Measures that the CBO said, “would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel more constrained in their policy choices.” In other words, expect deep spending cuts is Social Security and defense along with dramatically higher taxes. ⁸

Bloomberg noted that action may not be taken until we are amid a crisis, saying, “that’s playing with fire.” The vice dean of research at the Wharton School said that crisis is likely to occur in 2030. It could happen as early as 2025 if the next presidential administration launches a new expensive fiscal package.

Wall Street Warnings

The private sector has been weighing on the simmering debt crisis. JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Brian Moynihan, and Blackrock CEO Larry Fink have all warned about the severity of the problem. Citadel founder and CEO Ken Griffin said, “As we have cautioned over the past year, the surging US public debt is a growing concern that cannot be overlooked. It is irresponsible for the US government to incur a deficit of 6.4 percent when unemployment is hovering around 3.75%. We must stop borrowing at the expense of future generations.”⁹

Wharton Professor Joao Gomes foresees a fiscal crisis soon. The forced government response would cause inflation to spike and the dollar to collapse. “These measures would have a further devastating effect in the economy, leading to a decade long stagnation,” Professor Gomes explained. “Its consequences will be severe and leave lasting—probably irreversible—scars on our economy and society.”¹⁰

Conclusion

The national debt is continuing its inevitable climb to crisis. The government is now warning itself that our country’s current trajectory is unsustainable. But still no action is being taken. Facing inflation spikes, tax increases, cut services, and a devalued dollar, Americans are being left to fend for themselves. That is why so many are flocking to physical precious metals to protect the value of their retirement funds. Call American Hartford Gold today at 800-462-0071 to learn how a Gold IRA can safeguard your financial future from the severe consequences of our runaway national debt.

Notes:

1. https://www.foxbusiness.com/economy/million-simulations-show-us-debt-is-on-unsustainable-path
2. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
3. https://twittercom/dailychartbook/status/1774815483142787160
4. https://www.semafor.com/article/04/02/2024/skyrocketing-us-debt-could-trigger-market-shock-cbo-chief-says
5. https://www.foxbusiness.com/economy/million-simulations-show-us-debt-is-on-unsustainable-path
6. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
7. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
8. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
9. https://www.foxbusiness.com/economy/hedge-fund-billionaire-says-us-debt-growing-concern-that-cannot-be-overlooked
10. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/

• Gold prices have reached three back-to-back all-time record highs within the last few weeks alone
• Major banks such as JPMorgan and Goldman Sachs say we are in a commodities ‘supercycle’
• The Fed is signaling rate cuts even as inflation rises, and growth continues – creating a perfect support for gold demand

Gold Hits Record High Prices

Gold prices skyrocketed to a new all-time historic high of $2,222 after the Federal Reserve signaled a new dovish stance. The surge in gold prices confirmed predictions that we are in a new commodities supercycle. Gold prices are forecasted to keep rising as the stock market creeps closer to a crash. ¹

²

Interest Rates and Gold

Though the Fed is maintaining interest rates at 5.5% for the time being, Fed Chair Powell confirmed that 3 interest rate cuts are likely this year. The cuts could start as early as this summer.

The Fed dot plot shows a decrease to below 3% in the coming years. The Fed dot plot is a visual representation of Federal Reserve officials’ projections for future interest rate changes. It illustrates their individual estimates with dots on a chart. Notably, the cuts are predicted despite their increasing estimates for 2024 GDP growth and inflation.

Historically, gold has a negative correlation to interest rates. When rates drop, gold rallies. This reflects gold’s appeal as an alternative to interest-bearing assets. Some are interpreting this as a shift in their inflation fight. This shift creates a perfect scenario for gold to grow – lingering inflation and lowering interest rates.

Gold Hits New Highs Amidst Supercycle

Gold prices hit a new all-time high for the third time this month on the Fed’s announcement. Gold prices have breached $2,159 an ounce, $2,180 an ounce and the $2,222 an ounce mark – reaching three back-to-back all-time record highs within the last few weeks alone. Never before in history has there been multiple all-time record highs in such a short space of time.³

Since 2021, Goldman Sachs, JPMorgan and Bank of America have been calling this the beginning of a new commodities supercycle. They have gone so far as to call commodities the “preferred asset class over the next decade.” Four years later, the commodities supercycle is only speeding up, especially for gold. The yellow metal is positioning itself as one of the best performing asset classes of 2024. ⁴

Analysts at GSC Commodity Intelligence are calling it – “the beginning of a new historic Supercycle for Gold”. Gold is being driven by powerful tailwinds including rising geopolitical tensions and strong central bank purchases. In addition, Chinese demand is growing as their economy become unstable. A high-stakes presidential election is also sending people looking for hedges against upcoming uncertainty. Gold is finding support at above $2,100 and could hold at $2,150. All these factors have analysts thinking gold will reach $3,000 an ounce faster than anyone expects. ⁵

Rate Cuts, Uninverted Yield Curve & Recession

The inverted yield curve has long been a reliable recession warning. This abnormal pattern of short-term Treasury bonds yielding more than longer-term ones has been projected to end by December 2024. That is according to a Reuters poll of 62 bond strategists. The Federal Reserve’s rate cuts are likely to revert the curve back to its customary upward-sloping direction. Recession usually occurs when the curve “uninverts”.

The last two “uninversions” were in August of 2007, followed by the Great Recession, and in the fall of 2000, followed by the ‘Dot-bomb’ recession in 2001. After 2000, gold went on to outperform the stock market for the next twelve years.6

Politically Motivated Cuts

While the Fed has maintained a data driven decision making process, some analysts are assigning political motivations. A dovish turn would boost the market and make investors, large and small, happier with the current administration. Also, it would delay the onset of the impending recession until after the election. Thus, sparing the administration the damage a recession would cause to election chances.

In addition, a cut in rates will help ease the growing pressure they are facing to deal with the astronomical national debt. Across the board, the debt is being recognized as an existential existential crisis for the country.  By reducing rates, the cost to service the debt will decline, and buy the government more time to kick the can down the road. Ultimately though, the market will fall, recession will begin, and the national debt will have to be dealt with. When that time comes, the demand for safe haven gold is likely to spike.

Conclusion

The gold supercycle is revving up. The precious metal continues to rapidly break all-time high prices. Economic conditions support the upward trajectory. At the same time, the stock market is in the ninth inning of a bull market. Americans have a choice between speculating and getting out before the bubble bursts or buying into a bullish trend likely to continue for years to come. Now is the time to investigate how a Gold IRA can capitalize on the precious metal’s upswing. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:

1. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
2. https://twittercom/FT/status/1765135315470098443
3. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
4. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
5. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
6. https://www.ai-cio.com/news/yield-curve-will-right-itself-finally-but-not-until-year-end-experts-say/

• The Federal Reserve held rates at their 23-year high for the fifth time in March 2024
• Economists say the Fed’s data dependency, instead of strategic vision, is hurting the economy by keeping rates too high for too long
• The delay in rate cuts may present a buying opportunity for gold

Fed Keeps Interest Rates High

The Federal Reserve held rates at their 23-year high for the fifth time in March 2024. Fed Chair Powell signaled that rate cuts are likely later in the year. But he said the central bank wants to see more evidence of inflation moving towards its 2% goal before easing policy. As the ‘higher-for-longer’ rates stalls the economy, some experts are questioning the process behind the Fed’s decisions. They are now shining a light on the danger posed by those decisions. ¹

At the meeting on March 20, 2024, the Federal Reserve kept interest rates steady in a range of 5.25% to 5.5%. The Fed said it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”²

³

Rate Cuts Delayed, Again

Powell emphasized that the Fed is “strongly committed to returning inflation to its 2 percent objective.” And that they will continue monitoring the economic outlook to determine their future decisions. The central bank wants to be “careful” about slicing rates prematurely. The Fed’s dot plot, which shows individual members’ rate expectations, indicated three rate cuts are projected for 2024. Investors had initially anticipated six or seven cuts. Wall Street is betting that the first of those cuts will come in the summer. ⁴

Questioning the Fed’s Methods

From Wall Street titans to Main Street shop owners, Americans have no choice but to accept the decisions of the unelected Fed. But now the central bank’s policies are being called into question by renowned economist Mohamed A. El-Erian. El-Erian is the Chief Economic Adviser of Allianz and former CEO of Pimco.

He points out the Fed chooses to look backward with data points without looking forward with a strategy. He said, “In today’s economy, an excessive focus on the numbers tips the balance of risks toward keeping interest rates too restrictive for too long, unduly increasing the probability of output loss, higher unemployment and financial instability.” ⁵

El-Erian pointed out that “undue data dependency” led to calling inflation “transitory” back in 2021. And as a result, the Fed was forced to issue unprecedented rate hikes to make up for lost time. Powell’s commitment to depending on shifting data has contributed to uneven signaling, reactive measures, and sudden pivots. Unnecessary market volatility has resulted. It has been compared to driving a car by looking in the rear-view mirror instead of the windshield.

With inflation rising once again, policymaking will most likely become more overreactive. More uncertainty is likely to result. A few months ago, the market surged after pricing in a potential six rate cuts in 2024. Those six have been shrunk down to three, and even they aren’t guaranteed. Predictions for the first rate cut in two years were first pushed back to May and then to June.

Goldman Sachs analysts said, “Our inflation path for the rest of the year is now in a range where small surprises could have large consequences.” The chief global strategist at JPMorgan Asset Management said even reducing the cuts from three to two would upset the market. ⁶

A More Dire Prediction

Bernard Connolly is an economic guru who correctly called the Great Recession and the eurozone sovereign debt crisis. He warned the US will plummet into a severe recession unless the Fed acts promptly to loosen monetary policy. Large cuts are required due to a weakening labor market and the depletion of pandemic-era savings. Such a recession would sharply devalue the dollar. The global financial system itself could be put in jeopardy.

Conclusion

The Fed is continuing its ‘higher-for-longer’ policy on interest rates with no apparent strategic vision for the future. Uncertainty is growing along with greater market volatility. No one, perhaps not even Chairman Powell, knows when or how many rate cuts will be occurring. Americans interested in protecting the value of their retirement funds from lingering inflation and increasing market volatility are flocking to precious metals. The delay in rate cuts may present a buying opportunity for gold as the prices recede before continuing their upward trajectory. To learn how a Gold IRA from American Hartford Gold can protect your financial future, contact us today at 800-462-0071.

Notes:
1. https://www.cnn.com/business/live-news/markets-fed-meeting-03-20-24/index.html
2. https://www.npr.org/2024/03/20/1239535703/federal-reserve-interest-interest-rates-inflation-powell-fed
3. https://www.barrons.com/news/us-fed-s-benchmark-interest-rates-d89771e4
4. https://www.npr.org/2024/03/20/1239535703/federal-reserve-interest-interest-rates-inflation-powell-fed
5. https://www.bloomberg.com/opinion/articles/2024-03-01/a-federal-reserve-held-hostage-by-data-is-asking-for-trouble?embedded-checkout=true
5. https://www.cnn.com/2024/03/20/investing/premarket-stocks-trading/index.html