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A recent decision by the Federal Reserve may have long-reaching consequences on the power of American currency.
For decades, one of the monetary policy goals of the Federal Reserve has been to try to contain inflation. After a period of high inflation beginning in the mid-1960s, the Federal Reserve famously made reducing inflation its primary goal above all else. This era of high inflation finally ended in the early 1980s.
In the time since then, different Federal Reserve chairs have followed through with keeping inflation relatively low. In 2012, the Federal Open Market Committee officially announced an annual 2% target inflation rate.
Anyone who was around in the 1970s remembers the problems inflation created then. While the Fed seems confident that new periods of higher inflation are manageable, it could present some notable problems, especially for the portfolio of the average American.
Take Treasurys for instance. For a long time, they have been a staple of any portfolio mix, used as a safeguard and hedge. Now with interest rates near zero for the foreseeable future, Treasury yields could remain heavily suppressed.
Beyond Treasurys, there is the simple matter of dollars.
Hypothetically, let’s say the bulk of a family’s wealth is in dollars and related assets. A couple stores most of their money in dollars, and most of the inheritance they plan on leaving will be in cash. However, even without touching any of it, their nest egg shrinks over time—and their children are left with less over the long run.
This is because inflation can also harm the dollar. I’ve written before about how the U.S. Dollar Index has struggled lately. The dollar suffered its worst monthly decline in a decade in July 2020 when the U.S. Dollar Index, a measure of the dollar versus other currencies, declined 4.4%. It has been reported that foreign markets are moving into the euro and other currencies instead of the dollar.
On top of inflation, the dollar is also threatened by debt.
According to Yahoo Finance, the size of the federal debt now stands at 106% of the country’s gross domestic product (GDP). When this is combined with inflation, it could greatly diminish the effectiveness of the dollars in accounts across the nation.
This is why it is important to look for safe havens for wealth protection. For many years, analysts have believed that gold and other precious metals are effective hedges against the potential problems caused by inflation, government debt, and low interest rates. If the family from the earlier example had put some of their money in gold, it could be used to protect their wealth in the long term.
The post Inflation, Debt, and the American Family appeared first on U.S. Money Reserve.
Have you been wondering if you missed the market for gold?
It’s easy to see why you might think that if you’ve only been watching spot gold prices these past few weeks.
But, if you really want to know where gold prices are headed, you have to look at the market fundamentals: seasonal shifts in supply and demand, interest rates, inflation, the stock market, the economy, and current political events at home and abroad. Only once you see the bigger picture for gold can you make educated decisions on when to get into the market.
So, what do the factors that influence gold prices suggest right now? Watch the video for expert analysis of gold’s market movers.
Speak with a Scottsdale Bullion & Coin advisor for recommendations for your specific diversification and growth goals. Call 1 (888) 812-9892.
“”silver price”” – Google News
SPX to Gold/Silver Ratios Explored – What To Expect Next FX Empire
The post SPX to Gold/Silver Ratios Explored – What To Expect Next – FX Empire appeared first on WorldSilverNews.
Kitco News
(Kitco News) – Gold and silver prices are moderately down in midday U.S. trading Wednesday, pressured by a rebound in the U.S. dollar index late this week after it hit a two-year low earlier in the week.
The post Gold, silver weaker despite big sell off in U.S. stock mkt. appeared first on WorldSilverNews.
Chris Marcus
Thu, 09/03/2020 – 15:21
Seeking Alpha/Man Yin To/9-1-2020
“Recently, gold has seen a lot of movements and volatility. With its price is about to return to the level of $2,000, could it be the right time to take profit now, or is it better to wait until it records a new high? If I were you, I would simply buy-and-hold and completely ignore the negligible fluctuations, because I am telling you that gold could hit $14,000 or even more. It is understandable that it may sound a little bit speculative, but consider the rise of value will not be linear but exponential.”
USAGOD note: If nothing else Yin To offers some interesting reading at the link even if you think his price target a bit of a moon shot.
Financial Times/Mohammed El-Erian/8-31-2020
“[D]espite the vocal concerns over valuations having split away from underlying corporate and economic fundamentals, few fund managers have been willing to challenge the market by placing outright shorts. But the outlook is much more nuanced in the derivatives market that sophisticated investors use to express more refined views. Retail investors should take note.”
USAGOLD note: We post these warnings from time to time, but few pay attention. The psychology remains dance until you can dance no more even if you know the market is seriously overvalued and sophisticated professional investors are getting out.