The highly anticipated FOMC meeting has now come and gone. Although the central bank elected to leave rates unchanged-for now any-the bank did announce it would start the process of reducing the size of its massive balance sheet.
This announcement did not come as a surprise to markets, and thus far the market’s reaction to the announcement has been pretty quiet. The central bank stated that it will begin the unwinding process in October, reducing its balance sheet by $10 billion per month.
The Fed also lowered its long-term rate forecast from 3 to 2.8%. It also stated that risks look fairly balanced right now and that it is still on track for another hike this year and three more hikes next year.
Is it a good thing that the Fed is finally reducing its balance sheet? Absolutely. The fact that the Fed thinks the time has arrived to begin the unwind means that they likely feel that the economy remains firmly in recovery mode following the financial crises of 2008/2009. The fact that rates are likely to remain subdued, however, could be indicative of some ongoing economic angst.
Perhaps the biggest question may be when the next major economic problem might arise. Don’t forget that the Fed has thus far not been able to spur on any significant inflationary pressures. Also don’t forget that numerous key economic and political issues hang in the balance in the U.S. Finally, you must also keep in mind the current state of geopolitics.
The bottom line is this: Just because the Fed is planning to begin the great unwind does not mean there is any less reason to own gold. Speaking of the great unwind, perhaps an even bigger question may be how stock market investors may react? If stock investors see a more hawkish Fed and a less accommodating Fed, will they be as likely to keep buying stocks in the coming weeks and months as they have been over the last several years? Probably not…
The end of the bull market in stocks could be closer than many investors think, and if the bottom does fall out, look out below.
There are just as many reasons to own gold now as there were last week, last month, last year and even a decade ago. With the potential vulnerability of the stock market rally and the notion of rates remaining subdued for some time, there appear to be no solid arguments for not owning hard assets.
If you do not currently have an allocation in physical gold, now may still be the ideal time to get started. Speak with an Advantage Gold account executive today about the potential benefits of physical gold ownership. Our account executives are here to answer any questions you may have, and can even show you how to buy and hold real, physical gold using your IRA account.
Don’t wait for gold prices to go higher before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, balance sheet unwind, fomc, gold, interest rates