An exciting, dramatic 2017 is in its waning months. Gold experienced steady growth throughout the first nine-plus months, despite unexpected stability from the U.S. dollar and continued bubble-like gains in stock markets. This puts gold investors in a very strong position heading into 2018.
That said, much could happen over the final quarter of 2017. The geopolitical and economic worlds are teetering, and it’s anyone’s guess as to how long they’ll hold out. If you’ve been watching and trying to make sense of it all, here are some major headlines that all gold investors should pay attention to right now.
How Gold, Stocks React to Fed News
Current Fed Chair Janet Yellen may be on her last days as head of the Federal Reserve. Yellen has made no secret of her left-leaning political sympathies during her career, and President Trump frequently criticized her monetary policy while on the campaign trail.
It appears President Trump carries a shortlist of candidates to serve as the next chair. Pundits expect an announcement in October or November. As of press time, the administration is still conducting interviews.
The next Fed chair will play a critical role in setting U.S. monetary policy. This, in turn, heavily influences the strength (or weakness) of the U.S. dollar. While many economic conservatives and monetary hawks hoped Trump would signal an end to the low interest rate, money printing ways of the Fed, the President appears to be shifting towards a more liberal policy because it supports high stock market valuations (which, at least in the media’s eyes, points to a growing economy).
Continuation of low interest rate policies, whether through a new Fed chair or Yellen, could send stocks higher and the dollar south. In the short term, this would be a neutral move for gold. In the long term, however, it only strengthens the case for diversifying through precious metals.
Tension in North Korea, Syria, Spain, and Yemen
U.S. Secretary of State said that U.S. diplomacy with North Korea will continue “until the first bombs drop.” This is a strange way to describe peace talks, and they don’t convey hope or optimism.
Tensions have only intensified between the Trump administration and the tyrannical communist leader of North Korea, Kim Jong Un. The conflict threatens to draw in Russia, China, Japan, and South Korea as well—the latter three of which are among the world’s largest economies.
Meanwhile, gold investors should keep one eye on the never-ending conflicts in the Middle East. Through much of 2017, a U.S.-Saudi military alliance has conducted large-scale (and largely indiscriminate) bombings in Yemen, contributing to 17 million displaced Yemenis on the verge of starvation. Problems arising from the Syrian conflict negatively impact the economics of North Asia, Eastern Europe, and the Middle East. A growing refugee crisis is likely good news for gold.
Finally, member nations of the European Union remain the target of independence campaigns. A long simmering tension between Spain’s wealthy Catalan region boiled over in 2017 to a full-blown push for secession. If Catalan breaks away from Spain, the country will lose its most important economic center, and the fracturing EU will face even greater pressure from proto-nationalist groups.
Gold Stability as Cryptocurrencies, Bonds Experience Volatility
Powerful swings in bond markets and with notorious cryptocurrencies highlight the volatility inherent to the 2017 investment space. Bonds, which saw major yield growth in late 2016, were supposed to see rising yields throughout 2017. Instead, they displayed stubborn price growth, particularly in the second half of the year. Yields keep falling despite prognostications to the contrary.
“To try to explain why bond yields continue to fall in this type of environment is very difficult,” said head Treasuries trader Charles Comiskey from the New York at Bank of Nova Scotia. “This is uneconomic. This doesn’t make any sense at all.”
This kind of economic irrationality is very common in bubble environments and very disturbing for security-minded investors.
Meanwhile, Bitcoin, Ethereum, and other major cryptocurrencies continue to see massive swings in valuation. This is perhaps best characterized by Bitcoin trading on September 15, 2017, when bitcoin shifted violently between $3,800 and $2,800 per unit in a single session—at one point losing nearly 30% of its value.
You can escape volatility by owning real physical gold bullion. You can also keep the IRS at bay by storing your gold in a tax-advantaged retirement vehicle. American Bullion is here to discuss your options and help you every step of the way. Our #1 goal is to help you take control of your own finances—and we promise to be transparent, safe, and efficient in the process.
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.