The Federal Reserve this week is lifting its key interest rate by .25%. This move by the central bank did not come as a surprise. It seems the Fed took various steps in recent weeks to “warn” markets that a March rate hike was coming-even though just several weeks ago the odds or a March hike by the Fed were very small.
Given much of the recent hawkish talk from various Fed officials, the question no longer was if they would raise rates three times this year, but rather could they raise rates four times. Markets were seemingly getting prepared for an even more hawkish sounding Fed, and perhaps some changes being made on the central bank’s dot-plot.
The Fed was more on the dovish side of the ledger, all things considered. The central bank maintained its outlook for three 2017 rate hikes, and three the following year.
The less-hawkish announcement sent stocks higher while the dollar weakened. As the decision is still being digested by investors, both gold and silver are sharply higher today.
The Fed is in the precarious position of trying to keep inflation at bay while maximizing employment and keeping the economy running at a decent clip. If the central bank hikes rates too fast, they risk choking off economic growth. If they hike too slowly, they could get behind the curve as inflationary pressures rise.
We have said it before and we will say it again: A lot of what the Fed does or doesn’t do could potentially depend on what the Trump administration does or doesn’t do.
Although the Fed uses its own projections, the central bank could be interested in seeing if massive tax reforms and fiscal stimulus planned by the Trump administration actually come to pass. If these policies are implemented, it could potentially fuel growth and inflation, and drive the Fed to possibly take a more aggressive stance.
If these policies are not implemented, or if the size and scope of such policies is not what markets expect, the Fed could potentially want to leave its foot on the gas pedal, taking a slower approach to policy normalization.
Either way, you could make the argument for a long-term bull market in gold continuing. If inflation begins to accelerate, physical gold may potentially help protect purchasing power and possibly provide a hedge against rising prices. If the Fed begins to hike more aggressively, stocks could potentially head south as the multi-year bull market comes to an end.
Regardless of what the Fed does and what the new administration does, the reasons for buying gold are just as strong today as they have ever been. Gold has been a trusted and reliable store of wealth and value for thousands of years through all market conditions. This metal may potentially offer a meaningful hedge against inflation, deflation, declining currency values and more.
Now may be the ideal time to add physical gold to your holdings. Doing so has never been easier.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold ownership. Our associates are here to answer any questions you may have, and can even show you how to buy and hold gold using your IRA account.
Don’t wait for the next economic crises or higher inflation before acting. Explore your options today by calling Advantage Gold at 1-800-341-8584.Tags: advantage gold, dot-plot, Fed, fiscal stimulus, gold, inflation, interest rate hike, tax reforms