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Government officials and some health experts are speculating we may be close to turning the corner on the COVID-19 pandemic. Financial markets responded accordingly. In just the last two weeks, key indexes climbed roughly 25% from the 52-week lows they reached last month.
On the other hand, there’s a growing belief that people who think we’re on the path to recovery are getting ahead of themselves. Augusta Precious Metals analysts Devlyn Steel and Clint Doll delve into this subject in a recent Augusta Touchpoint video. They address the challenges that stand in the way of the global economy resuming business as usual.
What does this uncertain outlook mean for retirement savers? Do we just have to accept the fact that our retirement portfolios will continue to take hits as the pandemic’s economic fallout continues?
Not necessarily. First of all, as stagnant conditions persist, we expect the Federal Reserve will do more to keep markets stable and credit flowing. And the more they do, the better it is for gold. Second, individual retirement savers DO have actions they can take to protect and even grow their savings. (More about that below.)
It’s important to realize that practically no asset was spared the panic-driven volatility that ensued at the outset of the pandemic. Even gold was caught up in some of the madness. At the time, many savers liquidated everything except their beaten-down equity positions to raise cash and cover margin obligations.
However, once it became clear the Fed would throw everything it could at the upheaval, gold breathed a sigh of relief. In fact, the metal has become downright euphoric. Fed statements on March 23 and April 9 reinforced expectations that massive doses of dollar-weakening monetary policy are forthcoming.
And gold prices are responding to the Fed’s declarations in precisely the way you would expect them to. They are soaring.
Zaner: “Solid ‘Big Picture’ Bullish Fundamentals in Place” for Gold
It is not unusual for gold prices to demonstrate a correlation with dovish monetary policy. The pandemic is no exception.
On March 23, the Fed formally confirmed it would do whatever is necessary to support the economy during the health crisis. In its press release that day, the Federal Reserve said it “is committed to use its full range of tools to support the U.S. economy in this challenging time and thereby promote its maximum employment and price stability goals.”
Gold loved hearing that. But the Fed wasn’t done.
On April 9, the central bank announced it would throw in another 2.3 trillion dollars to support the economy. The amount of the assistance wasn’t even the most notable part of the Fed’s announcement. It was the statement that the central bank would expand the range of securities it buys to include junk bonds – an unprecedented move.
Sparked by these announcements, gold prices jumped roughly 14% in just the last 3 ½ weeks.
A more general outlook for gold prices also looks very strong throughout this “black swan” economic event. You may remember gold prices surged against the backdrop of the 2008 financial crisis and the Fed’s quantitative easing (QE) associated with that crisis. Over a 2 ½-year period, from 2008 to 2011, the application of QE1 and QE2 helped propel gold prices upward more than 160%. Now the Fed is expanding its asset-buying commitment like never before, and expectations are running high that there will be another great gold run.
America’s central bank isn’t the only entity helping to strengthen gold. In a recent MarketWatch article, Zaner Metals suggested gold will benefit from pandemic-fighting central bank actions around the world. According to Zaner, gold looks “to have solid big-picture bullish fundamentals in place, as deteriorating economic sentiment globally suggests even larger waves of government support will be seen in China, India, Europe and the U.S.”
The same article cites a revealing note by RBC Capital Markets analyst Christopher Louney. He suggests the climate will be positive for gold even if markets do begin to strengthen. “Even as markets improve, whether temporarily or not, and investors come back, we think gold will also absorb inflows alongside other asset classes,” Louney writes.
It’s an important point. We have good reasons to expect asset-buying sprees by central banks likely will stabilize markets and help put them on the road to recovery. During the 2008 financial crisis, QE1 and QE2 went a long way to re-establish a positive trend for markets. However, precious metals were an even bigger asset beneficiary of all the Fed’s efforts in the wake of the crisis.
The Only Way to Capitalize on Gold’s Robust Potential Is to Own It
Taking action can be a challenge. The aversion to doing so is very human. Some people resist taking action to help themselves because they’re natural procrastinators. They just never seem to get around to it. Others are anxious – even fearful. Those folks often find it difficult to step out of their comfort zone, even if an idea seems to make sense. Others put off making a move because they don’t feel they have all the information they need.
The bottom line is that these human “obstacles” can cause many people to miss out on a good thing that could mean the world to their future happiness, even as the risks and pitfalls are unfolding right before their eyes. It happened in the 2008 financial crisis. And it’s happening right now, as gold surges during the pandemic.
There’s simply no good reason to be left behind. Award-winning Augusta Precious Metals makes the process of learning more about gold and silver easy and enjoyable.
When you call Augusta at 800-700-1008, you’ll be in touch with our team of knowledgeable and experienced economic analysts. They love talking about metals and have all the information you need to get started. It’s important to know they’re aware the typical caller has little-to-no direct experience with gold and silver. You’ll find them to be very patient. They are happy to answer all of your questions, no matter how many you have.
Callers with retirement portfolios valued at $100,000 or more receive our free, informative guide on retirement protection. Those callers also have the opportunity to attend our exclusive Augusta Profit & Protect Web Conference. This live presentation is hosted by Devlyn Steele, Augusta’s senior economic analyst and Harvard Business School Analytics Program member. Mr. Steele is one of a few who accurately predicted both the 2008 financial crisis and precious metals bull market that followed. Web conference attendees have the chance to chat with him directly about the optimism surrounding gold’s prospects right now.
Gold prices look to be making a serious move here in 2020. Will you be making one, too? Augusta Precious Metals can help. Don’t delay – contact us today.