When it comes to your money, where do you put your trust? Do you put it in the hands of a handful of people who have the power to control the money supply in the United States? Do you put it in a precious metal that has held its value for more years than the Fed has been around? While the Fed’s job description does not include boosting or lowering prices, almost any policy the Fed imposes has a very real effect on the gold market.
No Real Clue from the Fed
In the most recent meeting of the Federal Open Market Committee on April 29, 2015, Janet Yellen and the rest of the Committee chose to make no change in their interest rate policy. Yellen noted that the economy in the first quarter of 2015 was not as strong as expected, registering just 0.2 percent growth. In order for the Fed to start increasing their 0.00 – 0.25 rate policy, the Fed wants to see maximum employment (whatever that may be) and an inflation rate of roughly two percent. The Fed wants to find that golden spot that has the economy thriving, but also avoid setting off a wave of hyperinflation.
Interest rates may go up later this year or in 2016, or they might not go up until we have a new president. With the Fed not breaking any real news, gold markets are maintaining a narrow trading range. Most traders and investors in gold do not think that the Fed is going to be able to extricate itself from the five-plus years of easy money. Inflation will come back and the dollar will weaken. Those are two bullish signs for the yellow metal and those who are patient and hold gold in the coming years will be well rewarded.
Have You Noticed the National Debt Lately?
It is such a big number that most people can’t fathom what it means. Our national debt is over $18.2 trillion and rising fast. If you divided that amount among the more than 300 million citizens of the United States, each individual would have to send a check for $56,000 tomorrow in order for the country to be free of debt. It takes more than $2.5 trillion annually just to pay the interest and service the debt. Whether you are an individual or a country, when you owe money, it costs you more money to borrow money.
The Dollar Will Weaken
We are headed for a major economic crisis because of our enormous debt. The dollar will not be able to sustain itself as the strongest fiat currency in the world. China is buying up gold and getting rid of U.S. treasuries to bolster its foreign reserves. Whether you believe it or not, China has plans to make the Yuan a world currency on par with the dollar and the euro. When that happens, the dollar will collapse and more of our budget will be needed to service our debt. The U.S. economy will probably not collapse anytime soon, but it is coming.
Plan for the Future
It is not a time to panic, but it is a time to reconsider the assets in your portfolio. The U.S. economy has had a good five-year run, but it is running out of steam. It seems to be a good time to buy gold and put it away for your future.