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The Federal Reserve is not in the business of selling gold – but maybe it should be.
The central bank’s regular assessments of the pandemic-riddled economy are by no means good news for Americans or the country. But it’s hard to dispute that those assessments suggest sunny days ahead for gold. In case you didn’t know by now, bad news for the economy, through history, often has meant good news for gold.
In fact, it could be said gold owes quite a bit to the Federal Reserve. Some of gold’s most notable performances in recent history have come on the back of Federal Reserve actions that are meant to fix economic problems but don’t always get the job done – or they take a long time to kick in. Gold’s epic rise during the 2008 financial crisis might be the best example so far.
It seems reasonable, then, to evaluate gold’s prospects as much on the basis of Federal Reserve outlook as anything else. On that note, some of the Fed’s most recent public statements inform retirement savers of two important pieces of information: (1) the economy will be a mess for some time, and (2) gold stands to do well as a result.
Powell: Fed’s “Economic Response” Is “Timely,” “Large” and Unfinished
So, what exactly IS the outlook for the economy with all this pandemic stuff going on? You’ve probably been hearing with increasing frequency that the economy will be mired in pandemic sludge for some time. When the outbreak was still relatively fresh, there was still plenty of talk that the economic fallout would be harsh, but brief. A rapid recovery would soon follow, we were told.
Minneapolis Federal Reserve Bank President Neel Kashkari says you can forget about that. There are now roughly 40 million Americans out of work and the prospects of continued public health consequences from COVID-19 remain prominent. “The V-shaped recovery is off the table,” Kashkari declared recently during his appearance at a virtual roundtable discussion. Referencing April’s near-15% unemployment rate, Kashkari said he expected that number to decline at a slow pace. His projection suggests double-digit unemployment will remain a part of the U.S. economic picture for a long time. It further suggests there will be no change in the Fed’s “whatever it takes” QE posture.
Kashkari isn’t the only Federal Reserve president who sees double-digit unemployment persisting through the foreseeable future. This past Tuesday, Boston Federal Reserve Bank President Eric Rosengren said the same thing at a New England Council webinar. Rosengren expects “the unemployment rate to remain at double-digit levels” through the end of the year. He also said the jobless rate could approach 20%. According to Rosengren, getting back to what the government sees as full employment is ultimately a function of one thing: effective containment of the virus.
“In sum, simply allowing businesses to reopen is not a panacea,” Rosengren said. “Public health solutions are paramount – without them, it will be virtually impossible to return to full employment.”
Once again, ugly news for the economy. But these messages are music to the ears of gold, which if it were a person would probably think much more Fed assistance is forthcoming.
Another Fed officer speaking out about the lousy condition of the economy is, in fact, the man in charge. During a recent speech at the Washington, D.C.-based think tank Peterson Institute for International Economics, Fed Chairman Jerome Powell made several statements that certainly could be interpreted as gold-positive signals.
The first was the chairman’s own admission that, in his estimation, there will be no V-shaped recovery: “What comes though is there is a growing sense I think that the recovery may come more slowly than we would like. … The path ahead is both highly uncertain and subject to significant downside risks.” Gold loves uncertainty and risk.
Powell also indicated that additional Fed assistance should be expected. “While the economic response has been both timely and appropriately large, it may not be the final chapter,” Powell said. Gold loves unfinished business.
There’s a third point in the speech where it could be claimed Powell sent out yet another gold-positive signal. As he closed out his remarks, Powell encouraged the government to do more on the side of fiscal policy as a way to stabilize the nation’s economy, saying, “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending.” Gold loves desperate economic actions.
Translation of Powell’s remarks: Run up the deficit – an act that also has been shown to spark a rise in gold.
Pandemic’s Economic Carnage Gives Gold a Clear Lane
It might be a tad excessive to say the Federal Reserve actually is telling you to buy gold. But it’s difficult to deny the Fed narrative of late is anything but exceedingly friendly to the yellow metal. And in my opinion there is no end in sight anytime soon. Gold already was headed for a phenomenal peak before the pandemic, and COVID-19 has added fuel to the fire.
Gold has climbed 30% since the Federal Reserve announced a return to accommodative monetary policy last June. Part of that jump is attributable to the unprecedented stimulus measures undertaken since the onset of the pandemic. But given the fiscal and monetary policy forces in play, it seems clear there’s still plenty of room for gold to run. In truth, it’s difficult to identify another asset besides gold that carries the same favorable prospects.
If you’re ready to add physical gold to your portfolio and take advantage of its strong protective qualities and growth potential, call Augusta Precious Metals at 800-700-1008. You’ll speak to a customer success agent who is ready to answer all of your questions. At Augusta, you also will have access to our team of dedicated economic analysts. Their job is to evaluate the condition of the economy daily, as well as the factors influencing gold and silver prices. These professionals are a superior source you can count on for information as you determine how best to include precious metals in your portfolio.
Retirement savers with portfolios of 100,000 dollars or more receive our complimentary guide to retirement protection. They also get a seat in Augusta’s live Profit & Protect Web Conference. Your host for this presentation is Devlyn Steele, Augusta’s senior economic analyst. Mr. Steele is a veteran analyst of nearly 40 years and a member of the prestigious Harvard Business School Analytics Program. He’ll share with you the realities of an American financial system that favors elites at the expense of regular retirement savers. He also will demonstrate how owning physical gold and silver can significantly improve your chances of realizing your retirement dreams.
A poor economic outlook generally means a lot of help is on the way from the Federal Reserve in the form of what amounts to a number of gold-positive signals. Jerome Powell himself is sending strong signals that more monetary (and fiscal) assistance is forthcoming. That could be great news for gold. And it could be great news for you if you own gold. Contact Augusta to learn more.