This week, the scheduled Federal Reserve policy meeting is likely to dominate much of the financial headlines. The Fed will be meeting Tuesday and Wednesday, and is expected to hike interest rates again by another 25 bps.
Investors will likely be far more focused on the central bank’s plans going forward, however. Right now, the Fed has another 25 bps hike penciled in for November. Although traders are widely expecting action again before the end of the year, there is also a possibility that the central bank could elect to hold off on another hike until next year.
The notion of higher rates and gradual, regular rate hikes has been a factor in the dollar’s recent ascent, and has also likely played a large role in gold’s lack of upside in recent months. The long-dollar trade could be running out of gas, however, and any hints from the Fed about slowing the pace of further hikes could potentially fuel a major reversal in the long dollar/short gold trade.
As has been seen before, the gold market may simply remain under some pressure until the Fed actually hikes rates, and could then see an influx of fresh buying interest. The Fed meeting this week could prove to be another case of “buy the rumor sell the fact.”
The rumor is that the Fed will keep hiking rates, the fact is that rates are not likely to go up much more during the current tightening cycle. Higher rates would potentially undo much of the economic gains that have been seen over the past few years, and the central bank likely does not want to rock the boat any more than necessary. Perhaps more importantly are the growing concerns about how the central bank will handle the next recession.
The bottom line is this: The potential benefits of buying gold right now ahead of the next great recession strongly outweigh the opportunity risks of higher interest rates. Once the next major downturn starts to take hold, the Fed will have no choice but to cut rates to zero again, and will also likely have to crank up the printing presses once again. This could lead to a much weaker dollar, and a strong ascent in dollar-denominated hard assets like gold.
At current price levels, gold could represent an excellent long-term value that may serve as an invaluable hedge against a weaker dollar, rising inflation and lower equity markets. Not only that, but it also comes with tremendous upside price potential, currently trading around 40 percent off of its previous all-time highs.
The time to act is now, however, as the risks of recession appear to be rising rapidly. Adding this key asset class to your portfolio has never been easier, and can be accomplished over the phone.
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 easy it is to build a significant allocation in gold using an IRA account.
Don’t wait for the next major stock market collapse or for the long-term downtrend in the dollar to continue. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, Fed, gold, rising interest rates, tightening cycle