The price of gold just topped $2000. Here’s why investors are going all in.
If you were smart enough to invest in gold earlier this year, you must be very pleased with that decision. The yellow metal has soared past previous highs, breaking records to blast past the $2,000 mark. In the past few months alone, the price of gold has increased over 30%, and its counterpart silver more than doubled in value in just a few short months.
The trend in portfolio hedging is nothing new. Investors have been doing it for years and rightfully so. Since the 2008 economic collapse where many investors lost everything, those who invested in gold saw a 250% increase. Still soaring, this safe haven is showing no signs of slowing down.
The Economy and The Federal Reserve
The US Bureau of Economic Analysis released its advance estimate of second-quarter GDP last week and it’s showing the US economic output declining by an annualized 32.9% in the second quarter, a record-shattering the previous record drop of 10% set in 1958. And that’s just the beginning.
Millions of Americans remain unemployed, the $600 unemployment bonus just expired, and the moratorium on evictions recently ran out as well. American households are being snapped back into reality and it’s looking pretty grim.
To keep people from feeling the negative effects of the economic slowdown, the government is in talks about a new stimulus package. However, in the meantime, the government is back to its old trick of blindly printing money in an effort to keep the economy afloat.
Enter the Federal Reserve, fully geared to monetize all that new spending. So far this year, the Fed has created nearly $3 trillion out of thin air, bringing the national debt to over $26 trillion. With Congress set to spend trillions more before the August recess, the Fed is going to be pressured to create even more money to keep monetizing the growing debt.
From Main Street to Wall Street and Back
Wall Street loves it when the Fed creates more money, as more cash combined with lower interest rates keep the Market casino going. Almost as soon as the Fed began to try to tighten monetary policy, markets reacted poorly and stocks sank, a clear sign that the US economy is tanking and bearing too much reliance on cheap money to keep the party going.
But rather than trying to wean businesses off easy money and low-interest rates, allowing markets to function, and bad debts to be liquidated, the Fed panicked and took the easy way out when stock markets plummeted earlier this year. The massive boost of money plunged into the financial system elevated stock markets once again, falsely eradicating fears among many 401k account holders as well as enriching Wall Street traders who reaped tremendous gains.
So what will the Fed do next? If Congress passes a multi-trillion dollar spending bill, will the Fed continue to monetize the growing debt through more asset purchases? Those on Wall Street may be happy, but the Main Street investors will continue seeing their standard of living eroded by the weakening dollar and inflation.
The Silver Lining of the New Gold Standard
Gold has broken through to a new record high, with a 30% increase in the past few months alone, surpassing the $2,000 barrier and continues to soar. Silver is experiencing a massive jump too, more than doubling it’s March numbers.
If you’re tempted to think that it’s too late to enter the Gold Rush, a drop in the near future is not likely.
Gold has withstood the test of time, establishing itself as a safe haven, especially in times of crisis. While there may be some minor dips as the market fluctuates, in the long term, both gold and silver are likely at the front end of another bull market. Some analysts are even calling for gold to hit $3,000 an ounce within a year or two. With demand for gold increasing, and supply dwindling due in part to coin shortages from mints, all the factors are falling into place for a massive price breakout.
Protect Your Assets and Retirement Plan With Gold
If you have assets in a tax-advantaged retirement account such as a standard IRA, Sep or Roth IRA, 401k, 403b, annuities, or similar accounts, your investments stand to lose value in the event of a stock market crash. If you’re like most investors, your retirement plan probably doesn’t offer an option to invest in gold, invest in silver, or other investments in precious metals. That’s where a gold IRA can offer you the protection you need to hedge your portfolio. With the price of gold continuing to soar to new heights, this is a great time to think to diversify your portfolio.
It’s simple and tax-free to roll over to a Gold IRA. In fact, it’s just like any other IRA, except that instead of investing in stocks, bonds, or investment funds like most IRAs, it allows you to combine or solely invest in physical gold coins or bars. It offers wealth protection, long-term value, and defense against inflation, deflation and economic turmoil, while still affording you the same benefits of a tax-advantaged retirement account.