Wednesday afternoon saw the conclusion of the latest FOMC monetary policy meeting at which the central bank, as expected, left key interest rates unchanged. The Fed also addressed its massive balance sheet, and appears to be on track for reductions starting in September or October.
The central bank is likely to tread very carefully, however, as it looks to contract its balance sheet without sending shockwaves through financial markets. The central bank seems to be of the opinion that the economy is ready to stand on its own after numerous years of assistance through ultra-low rates and quantitative easing.
Time will tell if the central bank is right.
On another note, however, the rate of inflation seems to be an ongoing thorn in the side of the Fed. The Fed said inflation is “running below 2%” instead of “running somewhat below 2%” as it stated previously. Although this change in language may seem insignificant and can be open to interpretation; the message seems to be that price pressures remain well below the bank’s desired target.
The ongoing lack of inflationary pressures has some central bank officials advocating caution as the Fed looks to raise rates while shrinking its balance sheet.
The central bank will need to walk a fine line indeed if it does not want to upset stock investors. Whether or not the Fed can implement policy to shrinking its portfolio of securities without fueling selling in stocks remains to be seen.
The current economic scenario is certainly challenging, and with a stock market bull market that has been moving higher for nearly a decade, it begs the question of whether the central bank will stick to its plan in the midst of a major stock market sell-off.
With little inflation to speak of, and an equities market that could be at or near a multi-year top, it is also quite plausible that the Fed is forced to lower rates again at some point in the coming months or years.
A major stock market wipeout with a backdrop of ongoing low rates could be the ideal recipe for significantly higher gold prices.
If you do not already own physical gold as part of your overall investment strategy, now may be the time to get involved.
Some analysts have suggested that the next stock market meltdown could make 2008/2009 look like a walk in the park. Is your portfolio prepared? The next major bear market could potentially fuel hundreds of billions in losses for equity investors. The time to plan ahead is now.
You can start by speaking 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 incorporate physical gold into your IRA.
The Fed seems to remain optimistic yet cautious. Perhaps you should too. Don’t wait for the next major stock sell-off before taking action. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, fomc, gold, inflation, interest rates, monetary policy