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Will More Stimulus Affect The Price of Gold?

By October 20, 2020 No Comments

There have been talks of another round of stimulus checks leaving many to wonder what it really says about the strength of our economy.

One of the biggest debates in Washington is about issuing another stimulus package. The economy remains weak, states are continuing restrictions and are still keeping businesses from being able to operate at full capacity. This leads to increased unemployment, depression, and Americans losing hope in the future of the economy.

Both political parties seem set on passing a stimulus bill but are at odds about bailing out corporations or individuals, and of course the actual amount. Also, will there be additional coronavirus lockdown and corporate limitations? Will the Fed have to continue printing more and more money, leading to its decline?

For gold investors, the questions are a little different. How will more economic stimulus affect gold? Will it increase or decrease gold prices?

Why It Might Be Questionable for Gold

If the economic stimulus temporarily stabilizes the economy, it could put the economy on the road towards recovery and normalization, potentially decreasing the price of gold. Knowing that a dip would be short term, would investors then decide to buy as much gold as possible, taking advantage of the low rates or will they hold out?

And that could mean that the gold price might decrease because investors will have more confidence that businesses will continue to grow and service their debt, and stock prices will increase.

Much of the recent demand for gold has come from investors who are concerned about the economy and its future. If the price of gold decreases will investors be tempted to sell or want to stick it out for the long haul, waiting for it to increase again and surpass the $2075 record high?

Why It Might Be Profitable for Gold

The fact that the economy still needs a stimulus package in order to survive says plenty about the declining state we’re in. An economy that needs government stimulus is an economy that is essentially on life support. Thus confirming investors’ worst fears about the economy and motivating them to buy more gold.

Depending on the size of the stimulus package, and whether or not it provides for direct payments to individuals, it could also stimulate gold purchases. The first round of stimulus payments to individuals saw many investors wisely adding to their retirement portfolios and putting that money towards their future.

If the government were to provide another $1,200 check or more, or a $2,000 check, or something even bigger, how many investors would use that money to buy gold? The goal of investments is to have money work for you and betting on safe-haven investments is a smart move for secure retirement savings.

Moreover, a stimulus package will add to the already unprecedented national debt. The larger the stimulus package, the more debt will have to be created and monetized by the Federal Reserve, further driving down the value of the dollar. With the devaluation of the dollar often comes an increase in gold value so the price will increase.

What Happens Next?

It’s becoming more and more clear that another round of stimulus checks will drive up the price of gold which is why experts are holding long positions on the yellow metal. Imagine if Congress continues passing stimulus package after stimulus package. It’s no wonder price predictions are seeing gold double like silver has been doing this year. The consistent rise of the national debt and the monetization of that debt by the Fed would further weaken the dollar and raise the gold value.

For decades now, gold has been increasing in value while the dollar gets weaken with every market crash and crisis. Investors see the writing on the wall and are hedging their retirement portfolios with gold to protect their money and secure their assets.

How Does Gold Actually Protect Your Retirement?

If you’ve been following the stock market you may have noticed a pattern, especially over the past 20 years. Since the beginning of 2001, gold has averaged annualized gains of 10.4%, versus 5.1% for the Dow Jones Industrial Average and 5.0% for the S&P 500.

Many analysts expect the outlook for stock markets to continue to weaken, at the very least over the next decade, with some expecting stocks to remain a net negative for quite a while. Gold, on the other hand, has broken through its all-time high this year, and even at its current price has exceeded most analysts’ price predictions for 2020 by over 10%.

Analysts forecast for gold to continue its rise and gain in value, as the economy struggles to regain its footing in the aftermath of coronavirus lockdowns. And that’s good news for both gold investors and those who have been thinking about purchasing gold.

When it comes to investing in gold, not only is the case for gold looking strong but the ways that investment options allow for. multiple ways to make the precious metal work for your retirement savings. One option that’s trending is that of investing in a gold IRA.

A gold IRA is just like a traditional IRA, only that it includes gold as part of your investment. It offers all the same tax advantages as any other IRA and is subject to the same regulations. However one of its main advantages is that unlike conventional IRAs offered by most brokers, a gold IRA allows you to purchase physical gold coins and bars through your IRA.

Even better, you can fund your gold IRA by simply rolling over assets from existing retirement accounts. So if you have, for instance, $100,000 in retirement assets in a 401(k) and you want to invest $50,000 of it in gold, you can roll it over into a gold IRA without any tax consequences.

Diversifying your portfolio with gold allows you to take advantage of gold’s consistent growth while protecting your investments against a weakening dollar. This year alone, gold climbed up 25% from its numbers at the beginning of the year. Long term, gold has increased in value by 250% since the 2008 crash and over 500% in the past 20 years.

If you’re just starting to think about retirement or are already well into the process, adding gold to your portfolio is the best way to ensure a low-risk retirement plan with optimal return on investment.

Have questions about retirement options? Allegiance gold will help you reach your financial goals and get the wealth assurance you deserve to retire with peace of mind.

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