The notion of additional interest rate hikes from the Federal Reserve has certainly weighed on the gold market in recent months. On the other hand, however, the pace and timing of any additional rate hikes remains likely to be slow and incremental, which could be considered bullish for gold.
This week could potentially provide some very good clues as to the central bank’s plans going forward. Weakness in some key economic data, along with the current geopolitical landscape could potentially give the central bank reason to pause. The question is: will it?
Last Friday’s first quarter GDP data was certainly a major let down as the figure came in well below consensus estimates of 1.1% with a reading of just .7%. Consumer spending was almost non-existent, as it rose just .3% which was the lowest rate since Q4 of 2009.
The major lack of consumer spending could potentially point to an upcoming recession, and any further significant misses in data are likely to be watched closely by the Fed.
The FOMC will be meeting this week to discuss the economy and monetary policy. No changes in rates are expected this month, as Fed Funds futures contracts are pointing to an extremely slim chance of any action being taken by the Fed. Currently, however, Fed Funds are pointing to a very good chance of another rate hike at the Fed’s June meeting, as markets price in a greater than 70% likelihood of another bump higher in the key rate.
Although it remains unclear if the central bank will stick to its previous forecast, the Fed does have numerous issues to consider and could find itself in a very difficult position.
The Fed may find slowing economic activity as inflationary pressures rise. In addition, the central bank may also have to consider the current geopolitical landscape. Stocks have held up well thus far, but any further escalation of tensions between the U.S. and North Korea could put a major dent into investor sentiment.
If stocks start to slide based on this or other factors, the central bank may want to avoid being overly aggressive as it looks to normalize rates as it could risk stomping out what little growth is being seen.
The Fed could find itself stuck between a rock and a hard place, and rates could potentially remain at very low levels for some time to come-or could even be lowered again if necessary.
A prolonged period of “stagflation” has been discussed in recent months and is looking more and more like a possibility that must be considered.
Now may be a good time to prepare for a period of stagflation, and hard assets like physical gold may play an important role during such periods.
Physical gold may help preserve purchasing power in the face of rising prices while also having the potential for price appreciation.
If you do not currently have an allocation in gold, now may be the ideal time to consider getting started.
Buying and holding physical gold as part of your overall portfolio 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.
The economy could be headed for a period of slowing growth, rising prices and rising unemployment. Don’t wait for the next major stock market crash before taking action. Explore your options for physical gold ownership now. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, consumer spending, Fed, GDP growth, gold, interest rates, recession