On the heels of very disappointing inflation numbers, gold and silver have seen some of their best performance of the year. Short-term profit-taking notwithstanding, the outlook for both gold and silver over the remainder of the year and into next year remains incredibly bullish.
Many analysts expect the average gold price to be at least $100 higher in the first quarter of this year than it is right now, and many also expect silver to break out from its current trading range. There are three primary reasons gold and silver have been gaining in price recently, trends which should continue to support both precious metals into the future.
1.) The Fed Is Trapped
The Federal Reserve finds itself trapped, both in terms of policy and in terms of political pressure. The pressure is there for the Fed to do something about inflation, which recently passed 6% year on year and is running at an annualized rate of over 11%.
The problem is that the Fed is also under pressure from the White House, as the administration has a whole range of spending bills it wants to pass, bills which can only be successfully funded if the Fed is waiting in the wings to soak up the new Treasury debt that will be issued to fund that spending.
So on the one hand the Fed is being asked to bring inflation under control, which means tightening monetary policy. On the other hand, the Fed is expected to subsidize government spending, which means easing monetary policy. That’s not an easy position to be in.
Former members of the Federal Open Market Committee (FOMC) have recently expressed their opinion that the Fed’s target for the federal funds rate should be at least 3%, if not 4%, in order to combat inflation effectively. Yet the federal funds rate remains at zero, and the Fed continues to expand its balance sheet.
That doesn’t bode well for the future, nor does it bode well for the Fed’s ability to tackle inflation. A sudden jump from 0 to 3% in the federal funds rate would all but guarantee an instant recession, if not an outright depression. And with the Fed expected to keep financial markets primed and stock markets high, expect the Fed to err on the side of higher inflation.
That higher inflation should provide an impetus to the price of gold and silver, just as stagflation did during the 1970s. Both gold and silver saw average annualized gains of over 30% for the decade, making them one of the best choices for investors looking to escape both high inflation and lackluster stock market performance.
2.) Biden Administration Is in Denial
The Biden administration has only lately come to acknowledge that inflation is a problem. And rather than direct the Fed, Biden has merely commanded the Fed to do something about it. That’s a problem.
Biden, like many in Washington and on Wall Street, trusted that the Fed knew what it was doing. It only recognized the problem after inflation had already become far too entrenched to be ignored. And now administration officials are trying to put a positive spin on inflation, while the mainstream media is working overtime to downplay the dangers of inflation too.
You’ve probably read about how inflation is a sign that the economy is strong, or that inflation harms only the 1%. Those are absolutely bogus.
Inflation harms everyone, but especially the poor and middle class. The areas that are seeing the highest prices increases are food, energy, and housing, the three categories on which the poor and middle class spend most of their money.
And the reason these prices are rising is because of the trillions of dollars the Fed created since last year, money that is now entering the financial system and causing prices to spiral out of control. The Biden administration is trying to do damage control by talking its way out of the problem, but too many American households are seeing their cost of living increasing to believe everything the administration says.
3.) Demand for Precious Metals Is Rising
The third reason gold and silver are rising in price flows from the first two: rising demand. With it becoming plainly obvious to more and more people that inflation is out of control, the Fed doesn’t know what it’s doing, and that the economy is on the verge of a major calamity, more and more people are fleeing to the safety and security of precious metals.
The outlook for stock markets over the next few years isn’t positive. As the Fed reduces its asset purchases, the easy money support for stock markets will evaporate, and stock markets could suffer a severe correction. And despite the wishful thinking of mainstream analysts, there’s no guarantee that they’ll recover.
Remember that during the 2008 financial crisis stock markets lost over 50% of their value. And they didn’t regain their pre-2008 highs until 2013, nearly six years after their previous highs in 2007.
Just think of that the next time you take a look at your retirement savings. If you’re nearing retirement, can you afford to lose six years or more waiting for your investments to recover lost value? That amount of time can be an eternity when you’re in retirement, and the lost gains, lost principal, and impact on your retirement security could be devastating.
Many investors found that out the hard way in 2008. They saw the value of their investments plummet, just when they needed the money the most. Many sold at the bottom of the market, locking in major losses. Their example should serve as a cautionary reminder.
And that’s why so many people today are trying not to repeat those same mistakes. They remember their portfolios losing money all through 2008, and they’re determined not to let it happen again. Those same people also remember what happened to gold and silver after 2008, as the precious metals left stocks in the dust. And that’s why demand for gold and silver is rising as more and more investors are choosing to protect their assets with precious metals.
Investing in Gold and Silver
The investment options available today allow investors both large and small to take advantage of the potential gains to be made with gold and silver. One popular option is a precious metals IRA, which allows investors to protect the assets in their 401(k), 403(b), TSP, IRA or similar retirement accounts.
Rolling over or transferring assets from a tax-advantaged retirement account into a gold IRA or silver IRA can be done tax-free, and allows you to lock in the gains you have already made while taking advantage of potential future gains in the gold and silver price through purchases of gold and silver coins or bars. And once you choose to take a distribution from your precious metals IRA, you can take that distribution in cash or in physical gold or silver, allowing you to continue to own gold or silver as long as you like.
If you don’t have retirement accounts, or if you wish to invest other assets such as cash holdings or assets in savings accounts, CDs, or other cash equivalents, there is always the option of a direct purchase of gold and silver. The types of coins and bars available to you are numerous and varied, with coins of all different sizes to cater to everyone’s needs and desires.
Goldco’s precious metals experts have years of experience helping thousands of customers just like you benefit from buying gold and silver, and they can help you through every stage of the gold and silver purchase process. Don’t leave your retirement savings at risk one day longer than you have to. Call Goldco today and learn more about how you can safeguard your savings with gold and silver.
Trevor Gerszt is founder and CEO of Goldco Precious Metals, a privately held retirement services firm in Los Angeles specializing in wealth and asset protection. Offering a range of investment accounts including traditional, self-directed and Self Storage IRAs; as well as IRA rollovers, Goldco has been named the #1 gold IRA provider in the U.S. by Inc. 500.
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