We live in a world today that is awash in money. The total M3 money supply in the United States is nearing $22 trillion. The national debt is over $30 trillion. The Federal Reserve’s balance sheet is over $9 trillion, and it can add trillions of dollars to the economy at the press of a button. And the US isn’t an anomaly. All across the world, governments are creating more money than ever before. Inflation rates are climbing. And, as you would expect, all of this new money is buying less and less. For most people, wages have not been keeping pace with inflation. This means that even if you’re getting raises, they may not be allowing you to afford the goods and services you’ve come to rely on. Part of the reason for this is that certain classes of goods are rising at faster rates than others. Head to the grocery store and you’ll see prices on some goods 30-50% higher than last year. Has your salary kept pace with that? Probably not. Gasoline prices have more than doubled since the beginning of 2021, but your salary hasn’t. And the higher the proportion of your income goes to buying staples like food and energy, the worse inflation harms you. Why Is This Happening?There are two primary reasons this is occurring. The first is that central bankers today, like misguided policymakers in times past, conflate money with wealth. They believe that high prices are synonymous with wealth and well-being, which is why they try to undertake policies that result in elevated asset prices. In the wake of the 2008 financial crisis, for instance, Federal Reserve Chairman Ben Bernanke mentioned on numerous occasions that the Fed’s quantitative easing policies were intended to support housing prices and keep them elevated. Never mind that housing prices were wildly overinflated to begin with, the result of years of the Fed’s loose monetary policy. The Fed was hell-bent on keeping housing prices inflated, regardless of whether that’s what markets really wanted or not. As a result of that, we saw the economy flooded with even more money, leading to prices rising across numerous asset classes. That’s why you’ve probably heard numerous references to the “everything bubble.” When more and more money gets forced into the financial system without a corresponding increase in production, more money ends up chasing more goods and prices inevitably rise. The Fed’s monetary policy for the past several decades has been a slightly smaller version of the idea that “if we give everyone a million dollars we’ll all be rich.” We all know what would happen if everyone were given a million dollars at the same time. As people start to buy, prices would increase, until they reach a level commensurate with the new amount of money in the financial system. This is an idea that has been tried time and again throughout history, under many different guises. Why the Fed doesn’t see it for what it is is anyone’s guess, but it isn’t going to end up any differently than previous money-printing quackery. The second reason flows from the first, and that’s the belief of central bankers in the neutrality of money. That is to say that central bankers by and large believe that increases in the money supply have no effect on economic output or the structure of the economy in the long run. They believe that monetary changes have short-run effects, which is why they will loosen or tighten monetary policy to achieve certain policy aims. But they don’t believe that the changes they make will have any long-term effects. That’s a puzzling belief, particularly in the face of the evidence to the contrary. Economists of the Austrian School are among those who point out the effects of monetary manipulation on the structure of production. The malinvestments that result from central bank monetary policy are what underpin the boom and bust of the business cycle. Whether it’s by lowering interest rates or injecting money into the economy through quantitative easing, the creation of new money incentivizes certain types of economic activity that wouldn’t be feasible without that new money. The structure of production is altered and resources are diverted to different sectors of the economy. The bust phase is when we find out just how that resource diversion worked, as industries realize that consumer demand just isn’t there. The boom turns to bust, people get laid off, and companies go bankrupt. Yet despite this boom-bust cycle occurring repeatedly over the years, and despite the obvious malinvestment and misallocation of resources, central banks steadfastly refuse to admit that their monetary policy is responsible for any of that. Because of that, they continue to solve every problem by creating more money, leading to even more booms and busts. Excessive Money Creation Is the Albatross Around Our NecksA world awash in money isn’t a blessing, it’s a curse. Because production hasn’t increased, more money is chasing the same amount of goods, and prices increase as a result. These effects don’t happen instantaneously, however. So those who are able to see what’s going on, or who receive the effects of the newly created money first, are able to benefit from the new money before prices rise. Those who aren’t so lucky get to watch prices rise and rise and rise first, then they get to purchase these more expensive goods with their devalued dollars. More and more people today are concerned that rising inflation and the falling value of the dollar are going to be the most important economic issues facing our society. Whether you’re 30 or 60, inflation and devaluation could have a major impact on your finances. If you’re younger, inflation will drive up your cost of living and leave you with less ability to save. And any savings and investments you make will have their gains eroded by inflation. If you’re older, inflation will also drive up your cost of living, but it will also reduce the purchasing power of your retirement savings. So if you thought you saved enough money for retirement, you may find out the hard way that you don’t have enough money. No one knows yet how long inflation will be with us, or how high it may get. But many are beginning to fear a return of stagflation. Stagflation first reared its head in the 1970s, as inflation reached double digits and the economy stagnated. If inflation persists this decade, and becomes as problematic as it was in the 1970s, it doesn’t bode well for Americans. That’s why more and more people are trying to protect their assets and put themselves into a position where they might be able to keep their wealth from losing too much to devaluation. And they’re doing that by buying gold and silver. Gold and silver’s average annualized gains during the 1970s were over 30%, providing one bright spot during an otherwise gloomy decade. And if gold and silver end up performing as well this decade as they did during the 1970s, owners of these precious metals could end up being very happy. Whether you’re looking to protect your retirement savings against inflation with a gold IRA or just looking to buy gold and silver coins for a rainy day, there are numerous options available to you. Call the precious metals experts at Goldco today to learn more about how gold and silver can help protect your hard-earned wealth from the ravages of inflation. The post Money, Money, Everywhere But It Buys Us Less and Less appeared first on Goldco. via Tumblr Money, Money, Everywhere But It Buys Us Less and Less
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It’s an understatement to say that the last two years have been far from normal. Thinking back to 2019 or early 2020, it’s amazing how much the world has changed in such a short amount of time. But as much as many of us would like to return to those halcyon days, the reality is that we’re likely entering a new normal, and we will have to adjust to it. This new normal will likely require many of us to change our habits. From eating to spending to investing, the safety and security we used to feel just isn’t there anymore. Rising prices at grocery stores, periodic shortages of consumer goods, and the growing risk of stagflation are coming together to create a perfect storm of uncertainty. Those who are able to adjust to the new normal will be able to survive and perhaps even thrive. But those who are unable to adjust risk being left behind in an economy that will probably look far different than anyone expected. Here are three aspects of the new normal that we’re going to have to face. 1. Rising PricesRising prices are the first and most obvious aspect of the new normal. And there are two causes that we’ll have to deal with. The first is inflation, the factor that’s most responsible for driving prices up in the short term. It’s certainly possible for inflation to become entrenched, much like it was in the 1970s, so that it could end up having a greater long-term effect than many expect. The other factor is the development of China, which could impact world trade and the flow of consumer goods to the West. Although the Federal Reserve has pledged to fight inflation, and says that it’s not going to waver, there are already signs of cracks in the armor. Atlanta Fed President Raphael Bostic has already publicly stated that he supports a pause in rate hikes in September so that the Fed can assess the impact its current hikes have had. In all likelihood the current series of rate hikes, plus the forthcoming balance sheet reduction that begins this month, won’t be able to bring inflation down nearly quickly enough for the Fed’s liking. And pausing rate hikes in September would just give more ammunition to the doves, who are still calling for more monetary easing. If the Fed departs from the path of tightening and begins to ease monetary policy again in order to combat recession or the threat of recession, it may not be able to get inflation under control. We could therefore see a return to the 1970s, in which rampant inflation drove prices upward for a decade. Developments in China are slower to materialize, but they’re nonetheless going to have an impact. For too long Western consumers have relied on cheap Chinese goods. From socks to car parts to machine tools, there’s hardly an industry today that isn’t reliant on “Made in China” goods. But as China develops as a country and grows its middle class consumer base, and as the country’s labor pool becomes older, smaller, and ever more expensive, manufacturers aren’t going to be able to rely on cheap Chinese production. Already the prices of many Chinese-manufactured goods are far higher today than they were a decade ago, and that trend is likely to continue. So if you thought prices on the food and goods you buy will ever return to “normal,” there’s probably very little chance of that happening. 2. Supply ChainsSupply chains are also at risk of never returning to normal. Many inventory systems around the world relied on just-in-time operation, always operating on the razor’s edge. Any disruption to the supply of goods could result in wide-ranging shortages. In 2020 we found out just how dangerous the just-in-time system could be, as lockdowns resulted in major disruptions to supply chains that still haven’t abated. Chip shortages are still plaguing numerous industries, and it’s anyone’s guess when things might get back to even a semblance of normalcy. Add in the effects of the war in Ukraine and the continued lockdowns in China, and you have all the ingredients for a continued and serious disruption of the way business is done. It could be a decade or more before supply chains settle down. 3. Food and EnergyFood and energy prices are the real kick in the pants for most Americans. We can’t survive without food, and we require energy to power our homes and cars. Food prices have been rising at a consistent pace for the past several months, and it’s not unusual to see prices on certain items 50% higher or more today than they were last year. And there are numerous factors at play here. On the one hand there’s the rising cost of foodstuffs themselves. Then there’s the rising cost of labor, as companies have to increase wages to get people to work. Then there’s the rising cost of packaging, particularly cans, as the war in Ukraine has upset metals markets. Finally, the rising cost and shortages of diesel to fuel delivery trucks has raised the cost of transporting food to stores. Energy prices have risen across the board, helped along by the war in Ukraine and its disruption of world oil and natural gas markets. Americans are paying more for gas now than they ever have, and the government actually thinks this is a good thing. President Biden actually tried to make it sound as though rising gas prices were beneficial, the price to be paid for “an incredible transition” away from fossil fuels. Were you ever asked whether you wanted to transition away from fossil fuels, and pay more money for that privilege? Didn’t think so. With a government that is hell-bent on pushing green energy, don’t expect to see prices on gasoline, natural gas, and other fossil fuels fall anytime soon, unless it becomes absolutely politically necessary for the government to do so. What Can You Do?While we may be at the beginning of the new normal, things are still in transition. Many people are waiting to see what takes place over the next few months or over the next year, as they’re still hoping to see a return to normal. But if things don’t return to normal, and this really is a new normal, then what? One aspect of the new normal that could be most damaging is the rise in prices, of food, housing, energy, etc. The value of your dollars is being eroded every day, faster than it has been in decades. And if you aren’t able to defend against that, your standard of living will likely decrease as you find yourself unable to afford the things you’re used to having. One way that many people are trying to protect themselves against this inflation and dollar devolution is by buying gold and silver. Gold and silver have a reputation for maintaining their value during tough economic times. During the stagflation of the 1970s, both gold and silver made average annualized gains of over 30% over the course of the decade. And while that rate of growth may seem unattainable for gold and silver today, many expect gold and silver to continue growing for the foreseeable future, as high inflation remains a threat and the economy totters on the brink of recession. If you’re worried about the effects inflation will have on your well-being, could gold and silver be the answer? Call the precious metals experts at Goldco today to learn more about how gold can help you protect and defend your hard-earned wealth. The post Are You Ready for the New Normal? 3 Changes You Need to Face appeared first on Goldco. via Tumblr Are You Ready for the New Normal? 3 Changes You Need to Face If someone told you that gold, toilet paper, and baby formula have one thing in common, would you be able to figure out what it is? Or would you scratch your head and have a tough time coming up with the answer? Let’s make it easy for you. Gold, toilet paper, and baby formula are all popular items that can be subject to periodic shortages due to increased demand and/or decreased supply. We’re all familiar with the shortages of toilet paper that started occurring in 2020 as people flocked to stores to stock up on consumer goods. Even today, you’ll find occasional bare shelves in some large stores. Baby formula has been in the news today too, as a manufacturing shutdown has resulted in significantly less formula making it to market. Parents around the country are struggling to try to find formula wherever they can. Less well known is the gold (and silver) shortage that is facing the market for investment coins. But it’s one that could affect you if you’re in the market to buy gold and silver. The Shortage DefinedNow, you may be asking yourself, how can it be that there are shortages of gold and silver? After all, nearly the entire amount of gold ever produced is still in existence above ground. And thousands of tonnes of both gold and silver are produced every year. But just because gold and silver are produced and exist doesn’t mean that they’re in a form that’s ready to be purchased by investors, and that’s where the shortages are starting to materialize. The difficulty is particularly acute among investors who want to open a gold IRA or a silver IRA. These precious metals IRAs are only allowed to invest in certain gold and silver coins that meet minimum fineness standards set by the government. There were billions of gold and silver coins produced by governments around the world over the past two centuries, many of which are still in existence and prized by both investors and collectors. But most of those coins don’t meet the fineness standards required for a gold IRA or silver IRA. So if you hoped to open a gold IRA and buy Krugerrands or $20 St. Gaudens gold eagle coins, or open a silver IRA and buy Morgan silver dollars or 90% junk silver, you’re out of luck. Attempting to buy those coins with the assets of a gold IRA or silver IRA would be classified as a distribution, and would subject you to potential taxes and fines. Most coins minted today by mints are eligible for investment in a gold IRA or silver IRA. They meet the fineness requirements established for precious metals IRA investment, and many are produced specifically for investment purposes. But due to surging investor demand, many of these coins are in short supply today. Think about the process it takes to produce a coin. Ore has to be mined, gold has to be extracted, then it has to be refined, then melted down and formed into a coin blank, from where it can finally be minted into a coin. This is a time-consuming and resource intensive process, and it isn’t set up to handle major surges in demand. In many cases, refining and minting capacity is contracted out weeks or months in advance, and changes just can’t be made. And if any single stage in this process experiences bottlenecks of any sort, the downstream effects on investors can be severe. Right now the precious metals industry is booming. With high inflation, a weakening economy, and stock markets that are showing indications that recession may be on the way, gold and silver are more popular than ever. And companies that sell gold and silver are facing unprecedented supply crunches. No company in the industry is immune from these supply crunches, either, as demand is just so incredibly strong. And with limited capacity, mints are running full steam ahead to try to satisfy that demand. Work With Trusted Precious Metals PartnersWith over a decade of experience helping our customers buy gold and silver, Goldco has become one of the biggest and most trusted companies in the precious metals IRA industry. And because of our position, we have developed relationships with numerous mints around the world to provide our customers with high quality gold and silver coins and bars. While we too have been impacted by the surge in demand and the supply constraints that exist within the industry, we’re in a good position to weather this difficulty and continue providing our customers with the quality gold and silver products that they have come to expect from us. But just because we’re working hard to ensure a steady supply of gold and silver coins to our customers doesn’t mean that you should take it for granted that you’ll be able to get coins when you want them. With what’s been going on in the economy recently, and with the potential for the economy to fall into recession this year, we can’t rule out an even greater increase in demand this summer as more and more investors rush to protect their assets with gold and silver. As the old saying goes, a bird in the hand is worth two in the bush. Updated for the 21st century, that might be something like: a gold coin in your IRA is worth two in your online shopping cart. Don’t wait until it’s too late to try to buy gold. Whether you’re looking to diversify your existing portfolio, buy a few gold coins to have on hand for when times get tough, or trying to protect your retirement savings with a gold IRA, now is the time to ensure that you can get your hands on gold if you’re interested in it. Call the experts at Goldco today to learn more about how gold can protect your hard-earned wealth. The post What Do Gold, Toilet Paper, and Baby Formula Have in Common? appeared first on Goldco. via Tumblr What Do Gold, Toilet Paper, and Baby Formula Have in Common? Just a few months ago it seemed that everyone thought the US economy was on fire. Markets were doing well, unemployment was low, and the real risk we were told was an overheating economy. But now we realize that isn’t actually the case. The risk in reality is of an economy slowing down, of growth stagnating, and of recession. Not just any recession, mind you, but stagflation. The concept of stagflation first arose in the 1970s and was coined to describe what most mainstream economists of the time thought was impossible: high inflation, high unemployment, and stagnant economic growth. According to the Keynesian orthodoxy of the time, higher inflation was supposed to lead to lower unemployment, and lower inflation would lead to higher unemployment. It was believed that monetary authorities could fine tune the economy’s performance by making that trade-off between inflation and unemployment. But the 1970s proved that wrong. For many people, the 1970s were a time better forgotten. A society that was still facing the effects of the Vietnam War and of the societal revolution embodied by the student protests of the late 1960s was now facing rising prices and a stagnant economy. Inflation peaked at 11%, while unemployment peaked at 9%. Oil prices rose, price controls were instituted, and shortages wracked the economy. A lot of that sounds pretty similar to what’s happening in the world today. But despite the headwinds faced back then, not everything was doom and gloom. A Golden Glimmer of HopeThe one bright spot for many people was the performance of gold and silver. The two precious metals saw annualized growth of over 30% per year over the course of the 1970s. The performance of precious metals far surpassed that of many traditional financial assets during that decade. Prices rose so much that even the debased silver coinage that circulated in many countries up to then was finally withdrawn from circulation because it became too expensive to produce. And now more and more analysts are getting wise to the fact that this decade may very well end up as a repeat of the 1970s. Does this mean that the same assets that performed well in the 1970s might do the same today? Could buying gold today end up paying dividends? Deutsche Bank analysts recently came to the conclusion that commodities (including precious metals) could end up doing better than traditional financial investment assets over the next decade. The patterns between the 2020s and the 1970s are so similar that they just can’t be denied. Parallels Between Now and ThenThe 1970s started off with President Nixon closing the gold window, severing the last official link between the dollar and gold. That got rid of the last restraint keeping the Federal Reserve from creating money ad infinitum. And it’s no wonder that prices started rising after that obstacle was removed. Similarly, the 2020s started off with the Federal Reserve creating trillions of dollars out of thin air to finance the government’s fiscal stimulus in response to the recession created by lockdowns. And now we’re starting to see the effect of those trillions of dollars result in higher inflation. There are numerous other parallels between now and the 1970s: rising oil prices, supply chain disruptions, rising crime, and the feeling that the bonds of civilized society are breaking down. For older Americans who remember Yogi Berra, this is deja vu all over again. And that’s undoubtedly why Deutsche Bank’s analysts are warning that commodities may be one of the few bright spots for investors in the coming years. With inflation as high as it is, the ability to make positive real returns is becoming more and more difficult. After all, with inflation at 8%, that means your investments have to make gains of over 8%, otherwise you’re losing money. That’s higher than the long-term returns of most financial investment assets, which is strike one. Then there’s the fact that most financial assets are already at extremely high valuations, making it difficult to imagine the possibility of 8% or higher growth on a sustained basis in the future. That’s strike two. Finally, there’s the reality that the fight against inflation is in the hands of the Federal Reserve, which doesn’t exactly have the best track record. That’s strike three. Can You Protect Your Wealth?Many people have already seen the writing on the wall and seen the parallels between now and the 1970s. These are uncertain times, and for all we know the US economy may already be in recession. If the next recession ends up being protracted, stagflation may become a much more familiar concept to more Americans. Thousands of Americans have already started protecting their assets with gold and silver in an attempt to stay ahead of possible stagflation. And many more are undoubtedly sitting on the sidelines, hoping for markets to stay strong but ready to protect their assets if need be. Deutsche Bank analysts aren’t the only ones warning of stagflation. Mohamed El-Erian, the former CEO of PIMCO and chief economic advisor to Allianz, is also warning that stagflation is almost inevitable. And according to recent news reports, 77% of investment fund managers foresee stagflation in the future. That’s a sobering statistic, and one that should underscore just how much pain the economy could be facing. If you haven’t thought about protecting your assets yet, when are you going to? The last thing anyone wants is to suffer another 2008-type loss. But with more and more people looking at what’s going on today and seeing the similarities to 2008, the likelihood of another 2008-style crisis occurring seems to be growing all the time. While markets came crashing down during the 2008 crisis, gold gained 25% and continued to climb. Many of the people buying gold today undoubtedly remember gold’s performance back then, which is why they’re looking to add gold to their portfolios today. If you want to learn more about how gold can help protect your hard-earned wealth, call the precious metals experts at Goldco today. With thousands of satisfied customers over more than a decade of doing business, our representatives are ready to answer any questions you have about safeguarding your savings with gold. The post Deutsche Bank Economists Warn of Stagflation appeared first on Goldco. via Tumblr Deutsche Bank Economists Warn of Stagflation Groupthink is a powerful thing. It wasn’t that long ago that most people seemed to think that the US economy was just fine, even hot. Consumer spending was strong, the unemployment rate was low, and markets were still incredibly high. But the reality was that there were severe problems underneath the hood, and everything wasn’t as wonderful as it appeared. It gives no one any pleasure to be proven right when issuing a warning, especially when it’s a warning about a coming recession. The reason most people warn about the issues is to make sure that people are aware of what’s coming, and to prepare themselves so that they don’t end up financially damaged as a result of a future recession. But too many people want to believe that the party will last forever, and that the good times will roll on indefinitely. Everyone loves to see the value of their 401(k) or IRA accounts climbing. But no one likes to see them lose value. Many people are so invested in their financial accounts that they fail to see what’s going on right in front of their very eyes. They’ve managed to convince themselves that everything is alright, that the Fed will ride in to the rescue, or that every dip in the market is just a buying opportunity before stocks inevitably rise once again. Far too many people ignore the warning signs before a recession, thinking that everything is going to be alright. They maintain wishful thinking all the way to the bottom. And many of them only see reality once it’s staring them in the face. Unfortunately, many of them decide then to protect themselves only then, and do so by exiting markets. But all they do is lock in losses and cost themselves dearly once the economy recovers. Had they been prepared ahead of time, and taken steps to protect their wealth before the recession hit, they may have fared far better. What Has Changed?So what has changed in the last couple of months that is leaving so many people bearish? In a recent survey, 68% of US CEOs stated that they believe the Federal Reserve’s efforts to combat inflation will result in a recession. That’s not an unusual belief, and it makes sense. After all, the major reason stock markets are still as high as they are is because the Fed has continued creating more and more money over the past few years. Now that the Fed has finally gotten serious about inflation and realizes that inflation is a problem, Wall Street realizes that the “Fed put” isn’t there. There isn’t anyone to backstop markets, there isn’t anyone to sop up trillions of dollars of government debt and mortgage-backed securities. There isn’t anyone who will bail out profligate financial institutions. From now on Wall Street can no longer play with house money, it will have to absorb all losses itself. And that return to market discipline could end up being very painful. The Fed has stated quite clearly that it will continue its tightening policy until inflation is brought under control. And given the fact that the Fed pumped more than $5 trillion into the financial system over a period of more than two years, it could be a while before the Fed is finished. While everyone liked to make fun of the bears while the economy seemed to be doing so well, now that reality is setting in that the bears were probably right all along, that realization hurts. Even worse, the next crisis could be worse than many were expecting. It seems like only a few months ago the only discussion of recession thought a mild recession might occur in 2023 or 2024. Now more and more people are talking about hard landings, stagflation, and years of potential misery. Between high inflation, potential food shortages, and the numerous what ifs facing the economy, the future seems more and more daunting every day. But is there anything you can do about it? Gold and Your FutureThousands of Americans have already taken steps to try to protect themselves and their financial assets. They realize that if they want their wealth to remain safe and secure, they have to take proactive measures to do that. Waiting until the middle of a panic to try to protect your assets is almost guaranteed to ensure that you suffer the maximum amount of financial pain. Many of these Americans who are protecting themselves today are doing so by buying gold, as they saw how well gold performed during the last financial crisis. During the same time period that stocks were falling over 50% from 2007 to 2009, gold gained 25%. And gold continued to make gains for years thereafter. If you suffered major losses in 2008, you probably remember the feeling of despair, of not knowing when you were going to stop seeing red. You may have wondered when markets were going to fully recover, or if they were going to recover. Those were tough times, and experiences that no one ever wants to face. So why put yourself at risk a second time? We don’t know how bad the next crisis will be, but there’s a definite possibility that it could be worse than 2008. And a real worst case scenario could see stocks returning to a 1970s-type situation in which they move up and down for years without making major headway. Just look at the performance of stock markets between 1966 and 1982 and you’ll see the kind of future that Wall Street fears. But you know what performed well during the 1970s? Gold. Over the course of the 1970s, gold’s average annualized gains were over 30%. Not only did that blow markets out of the water, it was significantly higher even than inflation, which peaked at 11%. With tremendous performance during the stagflation of the 1970s and the aftermath of the 2008 crisis, it’s no wonder so many people are turning to gold today to protect their wealth, hoping that gold will work its magic once again. From buying coins and bars to opening a gold IRA, there are numerous choices available to suit everyone’s needs. The question you have to ask yourself is whether you can afford not to buy gold. If a major recession occurs, or the economy enters a stagflationary crisis, how will your savings and investments fare? Will you have enough time to recoup your losses? Can you assume that the next recovery will be quick and easy? What will you do if it’s long and protracted? Those are all tough questions that you have to ask yourself. And if you think protecting your assets with gold may be the answer, call Goldco today to learn more about how gold could help you safeguard your savings. The post Two-Thirds of CEOs See Recession on the Horizon appeared first on Goldco. via Tumblr Two-Thirds of CEOs See Recession on the Horizon With everything that’s going on in the world today, more and more people are getting nervous about their financial well-being. Stock markets are down double digits across the board, and everywhere you look there seems to be a sea of red. After months of brushing off high inflation, a weak economy, and war in Europe, it seems as though markets are finally coming to grips with reality. Now more people understand just how dangerous and uncertain the future is, and they’re looking to protect their assets accordingly. Many of those people have decided to turn to gold to help protect their assets, as gold has a long and well deserved reputation as a safe haven asset during times of financial distress. And one investment vehicle in particular, a gold IRA, continues to gain in popularity. Here is how a gold IRA works. What Is a Gold IRA?You may be wondering what a gold IRA is, and you’re not alone. To those whose experience with IRAs comes from traditional brokerages, the idea of investing in gold through an IRA may seem strange or foreign. But as long as you follow all the rules and regulations, investing in gold through a gold IRA works just the same as investing in stocks or bonds through a conventional IRA. Advantages of Investing in GoldMany people choose to invest in a gold IRA because it allows them to benefit from the many advantages of investing in gold. There are four primary advantages to investing in gold. Diversify Your PortfolioIf there’s no other reason to invest in gold, portfolio diversification is it. Even the most anti-gold investors will often begrudgingly admit that putting a portion of your investment portfolio into gold can provide diversification. Far too many people think that investing in a broad array of stocks and bonds, or mutual funds and index funds, is sufficient to diversify their portfolios. They neglect to consider that their assets are completely dependent on the performance of Wall Street and the US financial system for their value. In the event of a systemic financial crisis, these portfolios may be overexposed to stocks or to US dollar assets, which could cost them dearly. That’s why more and more people are turning to gold to diversify their financial portfolios. Being inadequately diversified in the face of a coming recession could lead to major losses. Protect Against CrashesOwning gold can also help protect you against loss in the event of financial crashes. Many people watched in horror in 2008 as stock markets lost over 50% of their value. Trillions of dollars of investor wealth were wiped off the books in mere months. But during that same time period as stocks were falling, gold actually gained 25%. If you had been invested 100% in the S&P 500 in October 2007, you would have experienced about a 56% loss by March 2009. But if you had moved 30% of your portfolio into gold in 2007, your total loss by March 2009 would have been only 32%. Your total asset value also would have recovered quicker after the crisis, and even today your portfolio would be slightly higher in value versus someone who had stuck 100% with stocks. That’s how gold can work to protect and defend your wealth. Defense From InflationGold has also traditionally served as a safe haven asset during times of high inflation. With inflation currently at levels we haven’t seen in 40 years, inflation defense is going to become increasingly important. The last time the US faced such significantly high systemic inflation was during the stagflation of the 1970s, when inflation peaked at 11%. During that decade, gold’s average annualized growth rate was over 30%. That’s phenomenal performance in any year, but to keep that up over the course of a decade is unheard of. If inflation becomes entrenched today, as it was during the 1970s, many people are banking that gold could repeat that type of performance. And if that happens, those who own gold could look back in 2030 or beyond and be incredibly happy that they made the decision to buy gold. Asset GrowthGold is an asset that doesn’t just gain value during bad times, either. In fact, over the long run its performance can be even better than stock markets. Since 2001, gold’s average annualized growth rate is 9.44%. Compare that to the S&P 500 at 5.14%, or the Dow Jones Industrial Average at 5.17%. As you can see, gold has the ability to outperform stock markets even during a period in which stocks have seen many bull markets. And you can put that ability to good use through a gold IRA. Advantages of a Gold IRAA gold IRA has an additional advantage over other methods of investing in gold such as buying gold coins or buying shares in gold exchange-traded funds. The gold coins or bars that you buy for a gold IRA can be purchased with pre-tax dollars, and your gains within your gold IRA accrue tax-free until you decide to take a distribution. This is the same as any other IRA account, which is why a gold IRA is a popular choice for those with existing tax-advantaged retirement accounts such as a 401(k), 403(b), TSP, or IRA. As long as you follow the gold IRA rules and regulations, protecting your retirement savings with a gold IRA can be done relatively easily. Gold IRA RulesAs with any IRA or other tax-advantaged retirement account, you need to follow various rules and regulations. You may want to consult with your tax advisor or financial advisor to make sure that you’re following these regulations and not accidentally exposing yourself to taxes or penalties. The rules and regulations pertaining to gold IRAs are largely the same as those pertaining to other IRA accounts. Here are some of the most important gold IRA rules to be aware of. Rollovers and TransfersMany people choose to fund their gold IRA through a rollover or transfer from an existing retirement account such as a 401(k) or Traditional IRA. Sometimes this is done to protect investment gains made in these retirement accounts. Other times this is to put funds in orphaned accounts managed by previous employers to better use. Most of the time these rollovers and transfers from an existing retirement account to a gold IRA can be done tax-free. Goldco specializes in helping customers like you perform rollovers or transfers so that you can protect your existing retirement assets and ensure that your funds are put to good use. Contribution LimitsContribution limits are the same for a gold IRA as they are for any other IRA account. For 2022 the contribution limit to an IRA is $6,000 if you’re under age 50, and $7,000 if you’re over age 50. These limits of course don’t apply to rollovers and transfers, which can be any sum you want. IRA-Eligible Gold Coins and BarsNot all gold coins and bars are eligible for investment through a gold IRA. The tax code forbids collectibles, including coins, from being owned by an IRA. The exceptions are for certain coins produced by the US Mint, as well as coins and bars meeting minimum fineness requirements, which are .995 (99.5% pure) for gold coins. Most gold coins produced today meet these fineness requirements, as they are produced specifically for the investment market. There are numerous coin options that you can choose from. What this means, however, is that most older coins are not eligible for purchase through a gold IRA. If you were to attempt to purchase these coins with IRA assets, it would be considered a distribution, and would subject you to potential taxes and penalties. You also can’t purchase coins you already own with gold IRA assets, as this would violate rules against self-dealing. With over a decade of experience helping customers buy gold coins, and with established relationships with mints around the world, Goldco’s representatives can ensure that the coins you buy are indeed eligible for IRA investment. Tax TreatmentMost gold IRAs are Traditional gold IRAs, in which investments are made with pre-tax dollars and gains are taxed only at distribution. But you can also open a Roth gold IRA, in which investments are made with post-tax dollars and gains are not taxed at all. There is also the possibility of a Roth conversion, in which you convert pre-tax dollars from existing retirement accounts into a Roth gold IRA. In general, whatever can be done with a conventional IRA can be done with a gold IRA. Required Minimum DistributionsRegulations pertaining to required minimum distributions (RMDs) are the same for a gold IRA as they are for other IRA accounts. If your gold IRA is a Traditional IRA, you will be required to take RMDs once you reach age 72. If you attempt to take a distribution before age 59 ½, you will be subject to potential taxes and penalties. Keep an eye on these regulations and discuss them with your financial advisor and tax advisor, as Congress is debating changing some of these regulations and possibly even eliminating RMDs altogether. Gold IRA Custodian and DepositoryAs with any other IRA account, your gold IRA assets will need to be managed by a custodian. Goldco partners with gold IRA custodians who have years of experience in the precious metals industry. Your gold IRA coins and bars will also be stored at a precious metals depository. Goldco partners with depositories who have significant experience helping keep our customers’ assets safe and secure. 3 Easy Steps to Start a Gold IRAAt Goldco, we believe that buying gold shouldn’t have to be difficult. We do everything we can to make sure that our customers can benefit from owning gold. And that’s why there are just three easy steps that you can take to start your gold IRA. Sign Your Gold IRA AgreementIf you choose to open a gold IRA, you would first sign an agreement choosing to do business with Goldco. Fund Your Gold IRAOnce you have opened your gold IRA, you can decide how you want to fund your account. Rollovers or transfers from existing retirement accounts are a popular option, and can be done tax-free in most cases. Goldco’s representatives have helped thousands of customers get started with the gold IRA rollover process, and they can help you too. But be sure to consult with your financial advisor and tax advisor to make sure that you’re not going to incur any tax liabilities. Select and Purchase Metals for Your Gold IRAOnce you have funded your gold IRA, you get to decide which gold coins or bars you want to buy. That’s part of the beauty of a self-directed gold IRA, the ability to control your asset allocation so that you buy what you want, when you want. You are in complete control of your investments. Goldco offers coins and bars from mints around the world, and our established relationships mean that we can offer you coins that are guaranteed to be authentic. Once you have purchased your coins, they will be shipped to the depository you choose, which will then keep your gold safe and secure. And when you decide to take a distribution, you will be able to take that distribution either in cash or in gold. Interested in a Gold IRA?Buying through a gold IRA shouldn’t be difficult. With Goldco’s years of experience and thousands of satisfied customers, we know just what it takes to streamline the process of buying gold so that you can get started protecting your wealth as quickly as possible. If you’re looking to safeguard your retirement savings, a gold IRA could be just what you’re looking for. The ability to seamlessly roll over or transfer funds tax-free from existing retirement accounts, the numerous gold coin and bar options available to you, and the ease of providing quick diversification and protection make a gold IRA an increasingly attractive option in today’s uncertain financial environment. Why let your hard-earned savings remain subject to the potential pitfalls of Wall Street? If you’re nearing retirement, you can’t afford to sit through another financial downturn and watch your retirement savings disintegrate before your eyes. You may not have time to recoup your losses, especially if the recovery from the next crisis is one that is long and protracted. Every day that your assets remain unprotected is another day that they’re at risk of loss. Don’t leave your wealth vulnerable any longer. Call the experts at Goldco today to learn more about how gold can help protect your savings. The post This Is How a Gold IRA Works appeared first on Goldco. via Tumblr This Is How a Gold IRA Works With all the headlines talking about how high inflation is, there’s a crisis brewing under the surface that is going largely unnoticed: the debt bubble. This debt bubble is perhaps the largest in history, one that is growing every day. And when it bursts, it could take you down with it. Rome wasn’t built in a day, and this debt bubble wasn’t either. It’s the result of decades of deliberate policy decisions, both in terms of monetary and fiscal policy, that have built debt in both the public and private sectors up to historic proportions. Even people who should have known better have succumbed to the allure of cheap and easy money, putting themselves in a precarious financial position. The financial crises we’ve had in the past have merely postponed the day of reckoning. Each time this debt bubble seems set to burst, central banks step in and paper things over with even more new money. But that won’t work forever. At some point we’ll have to pay the piper, and when it happens, millions of people could be financially harmed. Here are three reasons the debt bubble bursting could wipe out your wealth. 1. Government Spending ConstraintsRising interest rates mean that the federal government now finds itself between a rock and a hard place. Issuing new debt to finance its deficit spending means paying higher interest rates, and therefore paying more money to service its existing debt of over $30 trillion. And with the Federal Reserve vowing to shrink the size of its balance sheet, the government isn’t going to be able to rely on backdoor debt monetization through new money creation. So this leaves the government with three options to fund its spending:
2. Companies Can’t Finance New DebtAn estimated 20% of US companies are so-called “zombie” companies. That means they’re only bringing in enough money to service their existing debt. So they can pay interest on their existing debt load, but they can’t do much else, including grow their business. With interest rates rising, these companies are going to face severe problems when trying to roll over their debt. Rolling over at higher interest rates means their interest expense will rise, something they may not be able to afford. And they can’t afford to retire the principal either, meaning they may be forced into bankruptcy. Some of these zombie companies are major firms with huge amounts of debt and large market capitalizations. Bankruptcy would not only wipe out the value of their bonds, it could also negatively impact the value of their stocks. If you’re an investor in a zombie company, whether you own bonds or stocks, the collapse of the debt bubble could negatively impact your holdings. 3. Households Tapped OutHousehold debt has increased significantly since 2008 too, and American households are now more indebted than ever. While there was a rush of spending over the past two years, that was supported by government handouts, the handouts which were funded by the Federal Reserve’s money creation. Now that the free money has come to an end, households are confronted with the reality that their debt levels are high, inflation is high, and their wages aren’t rising enough to keep up the pace. During the next crisis, millions of households will find out the hard way that they weren’t as financially secure as they thought they were. Hopefully you’re not one of the households facing an existential crisis due to high debt levels. But even if you’re debt-free, the impact of other households going into bankruptcy could affect you negatively. Just remember how many people walked out on their mortgages during the 2008 crisis. Homes went into foreclosure, owners didn’t do maintenance, property values fell. If you were banking on selling your house to help fund retirement spending, a debt bubble collapse could cost you hundreds of thousands of dollars if the value of your home fell significantly. Protect Your Wealth With GoldThe debt bubble has grown so massive that it’s no longer a question of if it’s going to collapse, it’s a question of when. Will the next crisis be the one that brings this house of cards crashing down? You could take the risk that the Fed can continue printing its way out of trouble, and that this next crisis will be overcome by more easy money. But if you’re wrong, you could suffer financially. Or you could start to prepare yourself by protecting your assets against the likelihood of a debt bubble collapse. And even if some of your assets lose value, other portions of your investment portfolio could be better protected. Thousands of Americans just like you have already taken steps to start protecting themselves and their assets against the collapse of the debt bubble by buying gold. And many of them have done so by opening a gold IRA. A gold IRA is like any other IRA, only that it holds physical gold coins and bars. This allows you to gain the benefits of owning gold, such as portfolio diversification, protection against inflation and stock market volatility, and long-term potential asset growth, while maintaining the same tax advantages as your current retirement accounts. You can even fund your gold IRA with a tax-free transfer or rollover from your existing 401(k), 403(b), TSP, IRA, or similar retirement accounts. That allows you to protect the retirement savings growth you’ve already enjoyed while benefiting from the potential performance of gold during a weak economy. Millions of people didn’t protect their savings during the 2008 crisis, and they watched in horror as stock markets lost over 50% of their value. Don’t let that happen to your investments. Call Goldco today to learn more about how gold can help safeguard your retirement dreams. The post 3 Reasons the Debt Bubble Bursting Could Wipe Out Your Wealth appeared first on Goldco. via Tumblr 3 Reasons the Debt Bubble Bursting Could Wipe Out Your Wealth Last month’s inflation numbers were a bit of a respite for the Biden administration, but hardly a relief. While month-on-month inflation dropped to 0.3% and year-on-year inflation dropped to 8.3%, we may not be out of the woods yet. In fact, the 8.3% print was yet another miss for Wall Street analysts, who had predicted an 8.1% inflation rate. This follows on the major GDP miss, with Wall Street expecting 1% growth in the first quarter rather than the 1.4% contraction that actually took place. We all know that one month doesn’t make a pattern, so any relief about inflation lowering should be taken with a grain of salt. It’s hardly likely that inflation has peaked yet, particularly as we’re still seeing the effects of money creation throughout the economy and the Federal Reserve has yet to begin its quantitative tightening policy. As unbelievable as it may sound, there are some people actually predicting that inflation will fall back to 2% by 2024. How exactly they expect that to happen is unclear, as you can’t pump trillions of dollars into the economy unchecked without having some sort of massive price increases. So if you thought inflation could be over and done with soon, think again. Here are four reasons inflation is here to stay and could even get worse. 1. Time LagsThe thing about monetary policy is that it’s a very coarse tool that’s used to try to fine-tune the economy. Because decisions about the course of monetary policy are made after analysis of data, and these data take a long time to collect and process, monetary policy will always be reactionary rather than proactive. Just remember that the Fed first pumped in about $3 trillion into the economy over the course of a few months, from about March to June of 2020. It then proceeded to pump another $2 trillion into the economy between June 2020 and today. What we’re seeing in terms of inflation today is very likely the impact of that initial first bout of money creation that happened two years ago. It took over a year before that money first showed up in official inflation statistics. So why would anyone think that inflation would be over anytime soon? It could easily be another year or more before the effects of the Fed’s total money creation make their way through the economy, although the Fed is now trying to counteract that with quantitative tightening. But inflation that has been allowed to get out of control isn’t going to fall back to earth overnight. 2. Amount of Money CreatedAnother important thing to remember is just how much money the Fed created. If we take our baseline as a Fed balance sheet of around $4 trillion, we see that the Fed has added $5 trillion to the economy with its balance sheet expansion. Its quantitative tightening is supposed to move up to $1.1 trillion off the balance sheet each year, starting in June. So by the end of 2023 the Fed’s balance sheet might be down to around $7.4 trillion. And if the Fed continued quantitative tightening until the end of 2024, it might get down to $6.3 trillion. That’s still a massive increase in the amount of money in the financial system from pre-2020 levels. And that money will remain in circulation. To get a sense of just what that money is doing, you need to look at overall money supply levels. Right now M2 is the broadest measure of money that the Fed is willing to publish. According to the latest M2 data, the M2 money supply is up about 8.6% year on year. That tracks pretty well with official inflation statistics. So if you want to get a sense of whether inflation is going to continue being a problem, take a look at M2. 3. Unknown Effects of Ukraine WarAnother aspect affecting consumer prices is the unknown effect of the war in Ukraine. Ukraine and Russia are both major sources of raw materials and foodstuffs such as barley, wheat, steel, nickel, aluminum, oil, and natural gas. From the seed oils in your baked goods to the energy you use to heat your home to the tin cans of food on the shelves of your grocery store, just about everything we consume will be affected by what’s happening in Ukraine. If you thought food prices were bad now, just wait until harvest time, when no grain exports are forthcoming from Russia or Ukraine. We’re already seeing prices for cooking oils rising as the effects of the war are making their way through the world economy, and reaction on the part of other governments, such as Indonesia’s ban on the export of palm oil to keep domestic prices stable, could make the problem even worse. Once again, we may very well have only seen the tip of the iceberg when it comes to rising food prices. And if food prices continue to rise, it will continue to push the consumer price index even higher. 4. Consumer Behavior Has ChangedThe biggest wild card is the behavior of consumers. We have become so used to low inflation that we don’t know how to protect ourselves against high and rising inflation. So many people were in denial for so long that anything was wrong that they failed to protect themselves and their assets against inflation. But if inflation becomes longstanding and entrenched, consumers and investors will have to learn to modify their behavior. We’re already seeing some signs of that. More and more consumers are starting to stock up in a major way when they go to the store, filling their shopping carts to build up supplies of food and toiletries and get ahead of price increases. More people are starting to buy consumer goods when they can get them, getting ahead of both price increases and potential shortages. Normally the relationship between prices and the money supply is pretty predictable. That’s because velocity, part of the MV=PQ equation, is generally stable. But if velocity increases, it can help boost prices even higher than what we would expect just from money supply increases alone. So far we haven’t seen major increases in velocity, but if it happens, particularly if inflation expectations grow, it could help feed into a cycle of ever higher prices. Gold and InflationRising inflation means the value of your dollars is declining every day. Money sitting in the bank is guaranteed to lose money every year. At the current 8.3% rate of inflation, your money would lose half its value in only five years. That’s why the Fed’s attempts to bring down inflation are so important. Many people don’t trust the Fed to do that, which isn’t surprising. After all, the Fed for the longest time didn’t acknowledge the existence of inflation, then said inflation was just transitory, and is only now getting serious about fighting inflation. Every day the Fed isn’t tackling inflation is another day that your wealth is declining. That’s why more and more people are interested in protecting their wealth against inflation. And they’re doing that by turning to an old standby: gold. Gold has been trusted for centuries to protect wealth during times of economic crisis and financial turmoil. The last time the US suffered a severe inflationary crisis, during the stagflationary 1970s, gold’s average annualized growth rate was over 30% for the decade. Gold also made tremendous gains in the aftermath of the 2008 financial crisis, something which many investors who lost big in 2008 noticed. And that’s why many are turning now to gold, to help protect them against big losses in the event the next financial downturn ends up rivaling 2008. If you’re worried about inflation taking a bite out of your hard-earned retirement savings, maybe it’s time to start thinking about protecting your assets with gold. The precious metals experts at Goldco have helped thousands of customers just like you benefit from owning gold over the years. With over a decade of experience and many thousands of satisfied customers, our representatives are ready to help you get started with gold. Call Goldco today to find out more about how you can put gold to work protecting your hard-earned wealth. The post 4 Reasons Inflation Could Still Get Worse appeared first on Goldco. via Tumblr 4 Reasons Inflation Could Still Get Worse Financial media for the past several months have been full of headlines touting how strong and hot the US economy is. The supposedly tight job market was supposed to be an indicator of economic strength, and inflation was explained away as the result of a strong, growing economy. Those who even acknowledged the likelihood of recession thought it was something that wouldn’t happen before 2023 at the earliest. Of course, anyone with an ounce of economic knowledge and who was looking at what was actually taking place in the world around us saw that was not the case. Weakness was already evident in 2019, before COVID hit. And even after the recovery, the struggles it took the economy to get back to normal indicated that not all was well. We received confirmation of that not too long ago, as US economic growth declined 1.4% in the first quarter of the year, a significant miss from the 1% growth expected. That’s a pretty significant error, one that can’t just be chalked up to the usual reasons such as statistical error. Mainstream media and financial markets tried to brush it off, dismissing a single quarter of decline as mere noise, nothing to worry about, and certainly not an indication that the economy is on the path to recession. But since recession is just two quarters of negative growth, and economic analysts got the call so badly wrong in the first quarter, can we trust that the economy isn’t on the path to recession? Economic Headwinds Growing StrongerAs much as we would like to think that everything is going to be just fine, the reality is that there are significant headwinds facing the economy. And four in particular could mean that recession is coming sooner than you think. InflationInflation is by far the most pressing issue facing the economy right now. And it’s one that the economic analysts also failed to see, ignored when it started, and tried to downplay as it got worse. We first heard that inflation would never occur, then when it did occur it was called “transitory.” And now that it is nearing 9% annually, we’re still being told that it’s nothing to worry about and that the Fed will have everything under control. But will it? The Fed is being forced to hike rates and cut its balance sheet at what could be the outset of a recession. This isn’t a position it’s used to being in, and its actions are predicated on the belief that last quarter’s economic contraction was an anomaly. If the Fed gets it wrong, it could turn the recession into something worse than it would have been. Supply Chain IssuesSupply chain issues are another major headwind facing the economy. Markets still haven’t recovered from 2020’s lockdowns, and supply chains have experienced accordion-like waves of supply and shortages. With China reverting to lockdowns of an unknown duration, world markets are going to be roiled yet again. The only question is how long will things last and how bad will it get. The disruption in China is coming on top of disruptions from the war in Ukraine, which have upset markets for metals, fertilizer, and energy among others. It may very well be another 4-6 months before the full effects of the war in Ukraine are felt, and shortages begin to materialize that could be very painful for consumers. Labor Market ConcernsDespite the so-called tight labor market, employers are having difficulty filling jobs at the same time as record numbers of people are quitting their jobs. In many cases it’s likely that employers don’t want to have to pay market rates for labor, thus leading many people to stay out of the job market. This is certainly not a traditional recessionary labor market, nor one which is easy to figure out. And with so many people already out of the job market, the next recession could very well occur without the huge number of layoffs you might otherwise expect during a recession. Debt BubbleOne of the major issues facing the economy, and one which many people forget about, is that of debt. The debt bubble that has been growing since 2008 is now larger than ever, and when it bursts it could unleash all sorts of damage. Around 20% of US companies today are so-called zombies, with revenues only sufficient to service their debt. They’re stagnant, unable to grow, and with rising interest rates now unable to borrow. In a high interest rate, recessionary environment, these companies are in a tenuous position, and they could be among the first to collapse. And once they start collapsing, they could start taking other companies down with them. Protect Your Savings With GoldWe’ve already started to see some weakness in stock markets in the past week as investors are becoming increasingly nervous and uncertain about the future. In many ways it’s an eerie feeling, as though we’re watching 2008 happen all over again right in front of our eyes. As many people remembered from back in 2008, stock markets lost over 50% of their value. But during the same period of time gold gained 25%, then continued to gain value as stock markets struggled to regain their footing. That ability of gold to prosper during times when other assets falter has made it a favorite asset to own during recessions for decades, and is helping to boost its popularity today now that recession looks imminent. Whether buying gold through a gold IRA or buying gold coins or bars to store at home, there are numerous options out there to satisfy everyone’s desire for gold. The key to protecting your savings with gold, however, is to buy gold before the crash comes. It isn’t necessarily that it’s going to be too late to buy gold if you wait until the depths of a recession, it’s just that you risk suffering major losses to stock and bond investments if you hold on to them too long. Why let your retirement savings lose 50% or more like many people had happen to them in 2008? Why not start protecting your assets with gold today? Markets are already down 13-20% for the year. Do you want to risk the likelihood of them losing even more value before you protect your investments? If you’re serious about protecting your wealth, maybe it’s time to start thinking about gold. Call the precious metals experts at Goldco today to learn more about how gold can help safeguard your savings. The post Recession Could Be Coming Sooner Than You Think appeared first on Goldco. via Tumblr Recession Could Be Coming Sooner Than You Think The performance of stock markets this year has been horrendous by just about all measures. And events of the past few days have brought to the fore the realization that the economy may very well be headed towards recession, if it isn’t in recession already. Stock market indices performed horribly last Friday and started off this week on another slide. The outlook for the future doesn’t look particularly promising either, as the Federal Reserve will begin its much anticipated quantitative tightening at the beginning of June. With such poor performance, and so much fear of the future, you would expect that gold would be shooting up in price as investors flock to the safety and security that gold can offer during times of crisis. But while retail gold demand has remained strong, the gold price has fallen right along with stock markets. How does that make any sense? If you’re scratching your head wondering why gold is following financial assets southward, you’re not alone. Both gold owners and casual observers are wondering why gold hasn’t taken off right now. But there are perfectly good reasons for what gold is doing, and for why the long-term outlook for gold remains bullish. Gold Doesn’t Always Go UpThe first thing to remember is that gold, just like every other asset, has its ups and downs. Gold may be less volatile than stock markets and not subject to the same booms and busts as stocks, but it still fluctuates in price over the course of the days, weeks, months, and years. Gold even can go down in price when you otherwise would expect it to rise in price. Just look at the period from October 2007 to March 2009. During that period, stock markets peaked in October 2007 and reached their lowest point in 2009, falling over 50%. Gold gained 25% over that same time period. But within 2008 there was a period of time in which gold had also fallen 30% from its highs, from $1,000 in March 2008 to under $700 by October 2008. But gold recovered after that and went on to continue making gains while stock markets faltered, and it never looked back. That’s why it’s important to remember that just because the gold price may be going down when we expect it to go up doesn’t mean that something’s wrong with gold. Gold is a long-term investment for most people, not a get rich quick scheme. Right now the gold price has been hurt by hedge funds selling their gold holdings to exit their investment positions. Perhaps they feel there’s a short-term case for shorting gold, or perhaps they have to drum up cash to cover other positions. Whatever the reason, that appears to be one of the primary factors causing gold to lose a bit of momentum recently. But it’s okay for that to happen. It doesn’t mean that gold isn’t going to end the year at $2,100, or that demand for gold is going to plummet. Ordinary people have been buying gold for months and they’re not going to stop, especially now that the economy could be entering recession and stock markets are showing signs of weakness. If anything, this price retrenchment could be a good buying opportunity to buy the dip. Gold as Part of a Long-Term InvestmentThe important thing to remember is that gold rises in value over the long term. If you own gold or if you’re looking to buy gold, you’re probably not looking to sell it again within the next year. Gold for you, like for many people, plays a part in diversifying your investment portfolio and protecting the long-term value of your assets. If your time horizon for investing in gold is 2 years, 5 years, 10 years, or even longer, these short-term fluctuations in the gold price aren’t anything to worry about. What matters is the long-term growth of the gold price, which as it stands right now could be very good given the headwinds facing the economy today. We have an economy that is teetering on the edge of recession, having contracted 1.4% in the first quarter of this year. We have inflation that is the highest it has been in 40 years, with prices seeming to rise just about every week. We have a job market in which more people than ever are quitting their jobs and employers are having a tougher and tougher time filling positions. And we have supply chains that are still completely discombobulated. Even worse than what’s happening today are the prospects for the future. The Biden administration wants to keep raising taxes and spending money. The Federal Reserve doesn’t acknowledge its role in creating inflation and wants to slightly tighten its monetary policy, but probably won’t be able to do nearly enough to fix things. The US economy in the 2020s is looking increasingly like the economy of the 1970s, and if this decade ends up being a repeat of what happened 50 years ago, we’re all in for a rough ride. Back then, inflation peaked at around 11%. Stock markets saw a total of about 4% growth over the course of the decade. Rising prices and periodic shortages were the name of the game. But gold was a bright spot, making average annualized gains of over 30% over the course of the decade, far surpassing both inflation and stock markets. If gold repeats that same kind of performance this decade, those who trusted the yellow metal to protect their assets will likely be able to give themselves a big pat on the back. Buying Gold TodayIf you don’t own gold already, now is the time to start thinking about it. Gold can diversify your portfolio, help reduce your risk profile, and protect your assets against loss during financial downturns. And best of all, you can buy gold using existing savings and investments. A gold IRA allows you to use existing retirement assets from a 401(k), 403(b), TSP, IRA, or similar account to buy gold coins and bars tax-free through a rollover or transfer. Your gold IRA offers the same tax advantages as any other IRA account, allowing you to use pre-tax dollars to buy gold. Once you take a distribution, you can take that distribution either in cash or in gold, allowing you to continue owning gold even after the government requires you to take required minimum distributions (RMDs). Opening a gold IRA can help you protect existing retirement assets you may already have. Or it can help you use funds that may be held in a previous employer’s retirement plan that are just languishing there. And if a gold IRA isn’t something you’re interested in, you always have the option to buy gold coins or bars using cash or cash-equivalent assets such as bank accounts, CDs, etc. Don’t let short-term gyrations in the gold price discourage you from protecting your wealth with gold. If the economy falls into a crisis as bad as 2008 or even worse, not buying gold could end up being something you regret for years to come. Call the precious metals experts at Goldco today to find out how you can start protecting your hard-earned savings with gold. The post Confused About Gold? You’re Not Alone appeared first on Goldco. via Tumblr Confused About Gold? You’re Not Alone |
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