In spite of momentary “clearings,” a major economic storm continues to brew and bear down on American investors. Fraught with high political pressures, both global and domestic, a growing depression in GDP, also both global and domestic, and a potential downpour in artificially manipulated stock market values, the advancing storm is set to wreak havoc on those financial residents unconcerned and or unprepared. Goldman Sachs Group Inc. (GSG) suggested this week that investors should diversify their long-term bond holdings with gold, citing “fear-driven demand” for the precious metal. “Gold cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever,” GSG analysts including Sabine Schels reported in a memo last Friday. “We still see upside in gold as late-cycle concerns and heightened political uncertainty will likely support investment demand” for bullion as a defensive asset.
Gold climbed to a six-year high in September, as the Federal Reserve continued market manipulations by cutting borrowing costs, as the total block of debt yielding less than zero climbed to a record $17 trillion, reinforcing the defensive appeal of non-interest bearing gold. Hedge funds and other large speculators wasted no time to boost gold holdings by 8.9% in the week ending December 3. That’s their biggest weekly increase since September.
Last Friday, gold fell more than 6% from the daily peak to the closing price of $1,460.17 in the spot market. GSG reported that the correction on gold bullion prices still has room to run, but they stand firm in their prediction that prices will climb to $1,600 over the next year, due to inflation, a falling stock market, and a growing global recession.
The Federal Reserve gathers tomorrow for a two-day policy meeting. The November jobs report pretty much ensures no interest rate movement from the Fed, but any positive hope that could be gleaned from Chairman Powell’s report might provide renewed energy for a last-minute stock market melt-up. Later in the week, however, new ECB President Christine Lagarde is expected to provide details on the EU’s outlook, which could quickly put the brakes on any positive motion, because many reports suggest the region is slipping into recession at an accelerating pace. Meanwhile, excitement for last week’s promise of a Phase 1 trade deal with China being completed by December 15 has run flat and at best could only put us into a position similar to where we began this year, less .2% or .3% in GDP. All of these elements reinforce at this time why additional physical precious metals are a great idea and today’s still low prices are just an additional bonus.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.