The price of gold has fallen a long way down since its heyday in 2011, but new data suggests the precious metal may be poised for a rebound.
Thinking of gold investing? Then read on.
The new information you will discover after reading this article will lead to one inevitable conclusion: a stock market crash is likely on the horizon, and gold’s status as a safe haven makes it the perfect place to park money.
A variety of conditions might cause a price surge for gold, but mainstream media sources are usually silent on these issues. The overriding narrative you hear instead on almost all fronts is that it’s a bear market for gold, which is fuelling a sell-off in the yellow metal.
Gold prices are down over eight percent this year alone, despite dire indications that danger is looming on the horizon in the form of Chinese stock market volatility and a Greek exit from the eurozone. Add slumping energy demand and broadly declining commodity prices to this volatile cocktail and you just might have the recipe for a stock market catastrophe.
But as traders have moved away from gold and silver, they have at the same time started promoting a bull market narrative of equities, despite low interest rates.
What’s really happening here, and what exactly is putting negative pressure on gold prices?
Will a Fed Rate Hike Spark a Stock Market Crash?
The first place you should turn your attention to is the U.S. Federal Reserve.
We all know it doesn’t function simply as a traditional central bank, but instead has a far broader and more far-reaching mandate. The 1977 amendment to the Federal Reserve Act essentially expanded its responsibilities; the Fed was now responsible for stabilizing prices and promoting employment, among other things.
What this has meant in practice is that most of the Federal Reserves policies in subsequent years have been directed by this dualistic mandate, which has had a significant effect on the price of gold.
Don’t know what I’m getting at? Let me give you an example.
Think for a minute about the 2010 midterm elections. Following a record Republican sweep on both the national and state levels, the role of fiscal stimulus fell upon the Fed. It announced a $600 billion quantitative easing plan.
While QE2, as the program came to be known, was supposed to end in 2011, economic conditions kept it going. Lackluster growth gave it momentum well into 2012 before another round of big money bond buying. Just how big? We’re talking to the tune of $85.0 billion per month being poured into the economy.
I’ll spare you the minute details and instead present the harsh reality that numbers bring: between 2007 and 2015, the U.S. Federal Reserve’s balance sheet grew from $1.0 trillion to $4.0 trillion.
Now, such easy money policies inevitably lead to a booming stock market, which is exactly what happened.
Real wage growth was almost nonexistent in this period, and unemployment remains a significant issue. No amount of number-twisting will hide the fact that approximately 11% of Americans are not gainfully employed. (Source: U.S. Bureau of Labor Statistics, last accessed August 12, 2015.)
Significant unemployment and bullish stock markets generally don’t add up. Either the economy is slumping, as indicated by the very real lack of full time jobs, or doing great, as evidenced by the high-volume trade of virtual tickets to the stock market. Which one do you think is a better indicator of where we are headed?
Translation: the so-called economic recovery after the 2008 financial crisis is nothing but a sham. We have essentially inflated the debt and shifted it around, preferring to ride out the wave of optimism than listen to hard facts.
This exact scenario happened during the Dot Com bubble burst, the aftermath of 9/11, and the 2008 financial crisis. In all three scenarios, the price of gold and silver skyrocketed overnight. If the stock market crashes, and all evidence points to it being very likely, gold will be the only safe place for your money.
Are Gold Prices About to Hit $5,000?
If you’re thinking about investing in gold, you’re not alone. Plenty of savvy investors have figured out what direction the economy is going, and are eager to hedge their investment portfolio with a healthy portion of gold.
But where to begin? Luckily, our top analysts have created special reports to help assure your financial future. Check out our special FREE report, “Gold: The Stock Contrarian Investors’ Best Play of the Decade.”