Last week brought with it numerous geopolitical issues and the highly anticipated central bank symposium in Jackson, Hole, Wyoming that is sponsored by the Kansas City Federal Reserve and takes place each year.
Central banks have been a key area of focus for investors in recent months, as many are now in the process of attempting to normalize monetary policies and reign in swollen balance sheets. The Fed’s role is so critical, in fact, that even U.S. President Donald Trump has voiced his concerns over the central bank acting too aggressively and undoing much of the good economic work that has been accomplished in recent months.
Although central banks are supposed to maintain their independence, it is difficult to imagine current Fed Chief Jerome Powell not taking the president’s comments into consideration.
Although it is not clear if the President’s recent remarks had anything to do with it, Powell and the Fed did appear to take a more dovish stance in their commentary from Jackson Hole. Markets are pricing in a very strong likelihood of a rate hike next month, and there are still strong expectations of another 25 basis point hike before year’s end.
The central bank’s comments did not seem to pack the type of hawkish punch some might have been expecting. The dovish tone of the commentary hit the dollar hard, and the gold market noticed. In fact, gold climbed by over $20 per ounce, reclaiming the psychologically important $1200 level.
The price action seen to end the trading week was indicative of just how big of a role the dollar may play in the gold market. Although it may be too early to determine if a long-term bottom has been reached in gold, the string rally seen to end the trading week is certainly a move in the right direction.
There is another, more important lesson to be learned from recent price action, however. History has shown that fiat currencies have a strong tendency to fail over time. The dollar may be no exception. By some measures, the greenback has lost the majority of its spending power over the last several decades, and it could potentially continue to weaken further.
A weaker dollar can make the cost of everyday goods and services rise as inflationary pressures take hold. A decline on purchasing power can eat away at disposable incomes, savings and net investment returns.
For this reason it is critical that investors maintain a significant allocation in alternative asset classes that may potentially offer a hedge against dollar exposure. Physical gold may be the most effective option available.
Adding gold to your portfolio has never been easier than it is today. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to harness the power of an IRA account to build a significant allocation in this key asset class.
Don’t wait for further dollar weakness to eat away at your purchasing power, or for the next major recession to take hold before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, balance sheets, Fed, gold, jackson hole, monetary policy, powell