Bloomberg has reported that Bank of America Merrill Lynch believes that gold is set to surge over the next year, as the country’s widening budget deficit and tariff-driven trade war begins to damage the U.S. economy. In a phone interview last week, Francisco Blanch, the Head of Bank of America’s Global Commodities and Derivatives Research said that gold could average $1,350 an ounce in 2019, as corporate tax reforms weaken the U.S. fiscal balance. “In the short run, the effects of strong dollar, higher rates dominate. But in the long run, a huge U.S. government budget deficit is pretty positive for gold,” he said.
The Bank of America warning follows on the heels of a similar concern, presented by billionaire hedge fund manager Ray Dalio, just weeks ago. Dalio went even further with his prognostication, stating that not only is the economic tide going to turn in 2019, but that it’s just the beginning of a longer economic downturn, which will see the dollar plunge, as the government continues to print money in order to fund a swelling national deficit. The Congressional Budget Office has reported that the U.S. administration’s tax cut, combined with new federal spending, will inflate the budget deficit to $1 trillion in 2020, which has forced the U.S. Treasury to lift note and bond sales to levels not seen since the aftermath of the 2008 recession.
The September rate increase leaves the Fed as the main driver in determining gold’s trajectory, but the swelling budget deficit, slowing economic growth, and growing tariff war with China could force the Fed into a more liberal stance that will stop or at least slow planned interest rate increases. Inflation is not achieving anticipated levels and as credit continues to tighten, the average American is going to be forced to cut back on spending, resulting in a greater level of recession than the Fed has accounted for. “Eventually the trade wars are going to come back and bite the U.S.,” said Blanch. “It could take longer, it could take shorter, eventually it’s going to happen, but maybe the Fed acknowledges it sooner, which is what people are going to be looking for in terms of getting more bullish on gold. We know that trade wars are not good for the economy.”
Trump has told Fox News that, “it’s time to take a stand on China,” which pretty much ensures that there will be no short term fix to this escalating situation. Physical metal prices may have already bottomed out, but there still may not be a better opportunity to capture profits from the stock market at or near its high and get into the long-term benefits and protection of gold and silver at today’s absurdly low prices. A sea change is coming, so no matter what, don’t get caught without a chair when the music stops. Call the experts at American Bullion for assistance, at (800) 653-GOLD (4653).