Putin’s War, inflation, and rising interest rates will undoubtedly increase demand for gold.
Historically, there’s no question what happens when war, inflation, and rising interest rates grip an economy. These factors have caused the demise of some of the world’s greatest economies. It’s not always a rapid collapse, like the Great Depression, but economic downtrends are readily apparent and relatively consistent. By the end of last year, stock investors were feeling good about the post COVID-19 economic potential, but on February 24, 2022, without provocation, Vladimir Putin attacked the Ukraine, sending humanitarian and economic shock waves through Europe, the United States, and the world. The attack had an immediate impact on energy prices worldwide and caused an embargo on Russian oil.
American oil companies quickly moved to increase production capacity, but it’s a long and arduous process. Germany and the European Union moved to shut down construction and the delivery of Russian gas by way of the Nord Stream 2 Pipeline, soon after the invasion began. Now talk of annexation by Russia has forced Ukrainians to cut off another Russian gas pipeline supplying Europe. Combined with stiff and growing sanctions from the United States, the Russian economy is staggering, but still damaging the global economy.
Stocks are receding and gold is poised to bounce.
When the year began, many indices were at or near their high by closing bell on the first day of trading in 2022 both the S&P 500 and the Dow Jones industrial Average had achieved record highs. However, since that time the NASDAQ composite has lost nearly 28%. The S&P 500 has lost nearly 18% and the DJ I A has lost 13%. Bitcoin, which captured investor imagination and was responsible for introducing crypto to the investment world has fallen more than 35%. In addition however, stocks that had been setting the pace for an impressive bull run have quickly become quite battered and beleaguered.
Four of the best movers on the DJIA in 2021 were; Cisco, Goldman Sachs, and Home Depot, which are down 23%, 26%, and 30%, respectively. Three popular stocks that were leading the bull charge on NASDAQ in 2021 are; Tesla, Amazon, and Meta Platforms, which are down 33%, 36%, and 41%, respectively. These are not isolated instances. The stock market is in turmoil and it’s important to realize that particularly during the Trump years, public companies regularly conducted stock buyback programs that inflated stock prices, much to the pleasure of stock holders and company executives with golden parachutes, but in many cases, the action severely limited the company’s ability to weather economic downturns, or to fund programs that could increase sales, productivity, or inventory. This market vulnerability is now an immediate concern and if inflation, interest rates, and Putin’s War continue, then the economic downturn is sure to continue, even more in earnest.
Stocks have little hope to improve, while gold is ready to shine.
While all of these negative economic factors have managed to converge, since the beginning of the year, precious metals have also consolidated and begun to rise. As I’m writing this blog article, gold is up 3% for the year. Naysayers may suggest that because the price hasn’t exploded, its potential is limited, but savvy investors realize the “golden opportunity” this temporary buying window represents. And while some see increasing interest rates as a positive sign for the U.S. dollar and treasury notes, such euphoria needs to be tempered with the reality that as long as inflation outpaces rates of return, it doesn’t represent a great hedge opportunity and when you incorporate the long-term benefits of an investment in physical gold, it becomes critically important to consider increasing typical portfolio allocation percentages, especially in gold.
At the beginning of the year, Bank of America suggested gold would hit $3,000 an ounce before the end of the year and they haven’t backed off their prognostication. More important to realize is the fact that Bank of America owns Merrill Lynch and Merrill Edge, which can’t sell physical metal. So, they don’t have a dog in the hunt and they’re telling people that they expect to see gold increase by 39% before the end of the year. Have you identified any stocks capable of that? Physical gold, whether stored at home or held in an IRA, is a simple, convenient, and protective hedge against all the economic mayhem headed our way.
Take action now! Call the precious metal experts at American Bullion: (800) 531-6525.