A Divided Fed

The Federal Reserve elected to cut interest rates again by 25-basis points at the conclusion of its meeting this week. The committee voted in favor of the cut by a margin of 7-3. The split may have been more than markets anticipated, and the Fed’s commentary was deemed to be not so easy when it comes to monetary policy.

7 of 17 FOMC members expect just one more rate cut this year. The not so dovish meeting sent stocks lower initially before they recovered. The decline in stocks is indicative of the disappointment that markets may have felt as the Fed did not provide an overly dovish path for rates ahead.

Although the Fed may be trying to take a wait and see approach, there are numerous issues that could potentially force the central bank to become more aggressive as it eases policy.

The ongoing U.S./China trade war, the potential for a messy Brexit, tensions with Iran and an accelerating global economic slowdown could all play a part in taking rates back to zero.

Other global central banks have also continued to keep rates at ultra-low levels, and many could be forced to cut rates further or even implement fresh QE stimulus. For all practical purposes, the era of easy money looks far from over.

Despite a more hawkish commentary by a divided Fed yesterday, the gold market has stood its ground and appears intent on maintaining trade around the $1500 level. As discussed previously, the market seems to have built a fresh base on which to move higher.

The gold market likely sees a path higher regardless of what the Fed does or doesn’t do.

If the central bank does not appease markets by cutting rates further, stocks will find a long-term top and the next major bear market will ensue. If the Fed does continue cutting rates, stocks may stay afloat for longer as the dollar weakens. Fresh stimulus may keep stocks from a total collapse, for now anyway, but at some point, the decade old bull market will conclude. At that point, a significant amount of investment is likely to find its way into alternative asset classes, and gold could stand to benefit significantly.

Against the current economic and geopolitical backdrop, the gold market could easily return to all-time highs around $2000 per-ounce and significantly higher.

Adding this key asset class to your portfolio has never been easier, and perhaps never more important. Pick up the phone and speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the role it may play going forward. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation using an IRA account.

Don’t wait for the next major stock market collapse or for the global slowdown to turn into a global recession before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.

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