Since the beginning of 2016, a debate has been ongoing about the pace and timing of additional rate hikes by the Federal Reserve. The Fed raised rates for the first time in almost a decade back in December, and it was thought that the central bank would embark on a series of further hikes in 2016.
Things haven’t quite worked out that way…
The Fed has not raised rates again through the first five months of 2016 and has cited numerous reasons for waiting. China’s weakness, a horrible start for equities, and overall slow global growth to name a few.
Gold has been moving higher as increasing risk aversion and a weaker dollar drove buying in bullion.
The Fed recently, however, alluded to a possible hike in June.
Should gold investors be worried?
Absolutely not in our opinion. Here are three reasons why:
The Fed Funds Rate Remains Very Low: The Fed Funds rate is currently sitting at .25-.50 percent. Even if several additional hikes were to take place this year (very unlikely), the Fed Funds rate would still be well below the historical norm. Even with additional hikes, monetary policy is likely to remain very accommodative as global growth concerns weigh and many nations are still fighting sluggish growth with various stimulus measures.
Stocks Could Be Topping: While stocks have come roaring back since seeing a correction early in the year, the market remains below last year’s all-time highs and has thus far failed to make a significant attempt at new highs. If equities are in fact in a distribution phase, a large correction or bear market could potentially drive investors from stocks into perceived safe haven assets such as gold, silver, and other precious metals.
The Current Expansion May Have Run Its Course: According to some analysts, the current expansion cycle began in June of 2009. We are now in June 2016. According to some studies, the average expansion cycle is about 39 months. The current expansion has been in place for 57 months. Could the expansion continue? Sure, anything is possible. The question is: Will it? We feel current indications are negative.
Global markets could once again run into selling and volatility if the present rate of growth does not improve.
Unfortunately, we do not see sufficient evidence that global growth is about to embark on a higher growth trajectory. In fact, we feel that investors could be in for a sustained period of lackluster growth and lower returns.
Are you prepared?
Given such an outlook, we feel that now is as good a time as any to begin allocating investment capital to gold, silver and other precious metals. Adding these hard assets to your holdings has never been easier than it is today, and your IRA account may be the ideal vehicle for building a precious metals portfolio to potentially help diversify your holdings and offer a hedge against declining currency values and inflation.
Could interest rates rise further? YES. Should you still be allocating to physical gold, silver, and other precious metals? In our view absolutely.
Keep your long-term goals in mind. Precious metals may potentially offer a significant tool for diversification purposes and as a hedge against a number of economic or geopolitical issues.
Don’t wait for the price of gold and silver to rise. Explore your options for physical precious metals ownership now. Call us today at 1-800-341-8584.Tags: advantage gold, buy gold, expansion cycle, fed funds rate, gold, rate hike