Are Investors Putting the Cart Before the Horse?

The year is quickly winding down, and gold may end 2016 on a bit of a sour note. The recent decline in gold prices, with a strong rise in stocks, interest rates and the dollar goes to show just how quickly things can and do change in modern financial markets.

Although gold could potentially remain on the defensive for the next several weeks or even months, we believe it is important to keep the recent sell off in perspective.

Equity markets have been moving sharply higher on the notion of increased government spending, tax cuts and other possible economic policies. Interest rates have risen significantly in just the last several weeks based on the same idea.

While increased fiscal spending and tax cuts sound fine and great on the surface, it remains unclear as to just how such policies may be implemented, if they are in fact implemented at all.

It would seemingly make sense that if the government cuts taxes and therefore reduces revenues while also boosting spending, that difference would equal a ballooning deficit.

This could potentially be characterized as simply another instance of “the can being kicked down the road,” as at some point that deficit will have to be dealt with.

What if Trump’s planned tax cuts and fiscal spending do not get through Congress? What if the package that ends up being implemented is significantly smaller than what appears to be the subject of discussions currently?

What if tax cuts and increased fiscal spending do not add any long-term measurable or sustainable boost to economic growth? Then what?

Some analysts have already suggested that could be the case-that all of the ideas currently under discussion would provide nothing more than a short-term boost to the economy with no significant long-term effect.

Then how will the economy keep going? How might it avoid slipping back into recession?

These are all questions that would seemingly make sense right now, yet few seem to be asking. Stocks have rocketed higher based on the idea of big spending, less regulation and tax cuts. Yet it remains very unclear what will actually end up becoming legislation.

It seems to us that markets are putting the cart before the horse, and sentiment could change drastically if some of ideas touted are not able to be put into action.

Financial markets are built on a sea of fear and greed. It was just last January that stock markets saw significant selling to begin the New Year while gold prices took off to the upside. Fears over China shook markets to their core, and that fear manifested itself in lower equity prices and higher gold prices.

China remains a potentially massive house of cards, while it remains unclear exactly what economic policies will be implemented under a Trump administration.

In our view, this is a time to be cautious rather than greedy.

Gold is still up on the year even after all of the recent selling, and the yellow metal could potentially see another significant run higher in 2017 based on a number of potential economic and geopolitical issues.

If you like getting more value for your money, now may be the ideal time to consider an allocation in physical gold or silver. If you already own these precious metals, now may be the ideal time to consider buying more.

Gold and silver will shine again-in our view it is not a question of “if” but simply “when.” We feel that 2017 could potentially be a big year for gold and silver, as so many economic and geopolitical unknowns may need to be dealt with.

Speak to an Advantage Gold account executive today about the potential benefits of physical gold and silver ownership, and learn more about the role these key asset classes may play within your portfolio. Our professionals are here to answer your questions, and can even show you how to buy and hold physical gold and silver using your IRA account.

Don’t wait for the next stock market collapse or for the price of gold and silver to rise. Explore your options today. Call us at 1-800-341-8584 to get started.

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