In what may be the most significant commentary of the week, Fed Chairwoman Janet Yellen’s prepared remarks have been released ahead of her testimony before the House Financial Services Committee today. Ms. Yellen alluded to the pace of further rate hikes being very gradual, and it seems that rates will not reach levels seen in previous tightening cycles.
Investors will be paying close attention to her commentary before the committee later today, as well as to the Q&A session to follow.
You have to wonder why, at this point in the cycle, the central bank still clearly remains reluctant to raise interest rates. We have said it before, and we will say it again: Perhaps the economy is simply not as strong as you might be led to believe.
The central bank may find itself in a very precarious position currently- a position that has come about due to years of ultra-low rates and quantitative easing. The question is: What could happen as the bank looks to unwind its loose monetary policy and normalize rates?
Yes-stock markets are at all-time highs. Yes-some areas of the economy have shown improvement. Yes-risk appetite seems to be robust. BUT-the central bank has thus far not been able to fuel inflation to target levels. In fact, the overall lack of inflation could be a significant warning sign about what may lie ahead for the economy.
The current scenario of low rates and higher stocks is not likely to continue. In fact, the Fed may have to consider the ramifications of increasingly hot financial asset prices. The central bank could, in some manner, be forced to take action.
Either way, it appears that the era of low rates is not over, in fact, it appears to be far from over. Concerns about the underlying strength of the economy along with the potential for a major stock market reversal could potentially lay the groundwork for a major rally in gold and other perceived safe haven asset classes.
In our view, it is not a question of “if” but rather “when.”
Right now may be the ideal time to consider diversifying with hard assets like physical gold. The yellow metal has been trending lower for several weeks now, and current prices could represent an excellent long-term value. This begs the question: Would you rather be buying stocks near what could be a major, long-term top or would you rather buy gold at what could be a major long-term bottom?
Gold stands to do well in an environment of low rates and declining equity markets, and it appears that low rates are here to stay.
Adding physical gold to your portfolio has never been easier than it is today, you just need to pick up the phone.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer your questions, and can even show you how to take advantage of your IRA account to build an allocation in gold.
Don’t wait for the next major stock market crash, or for gold prices to move sharply higher from current levels. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, Fed, gold, interest rate hikes, monetary policy, tightening cycle, yellen