The gold market remains weak today following a variety of data that could allow the Fed to move forward with its tapering plans this year. Despite the rise in weekly jobless claims today of 16,000, yesterday’s Fed meeting is being viewed in a more hawkish light today and that is likely the primary culprit behind the selling in gold today.
Risk appetite is ticking higher today as worries over the threat of an Evergrande contagion seem to be diminishing. Evergrande has an $83 million interest payment due to be made today, and although it is unclear if that payment has been made, many seemingly believe that the Chinese Government will not allow Evergrande to fail. The lack of contagion could pave the way for stocks to continue their march higher, while causing a decline in the desire for perceived safe haven assets such as gold.
The Federal Reserve did also allude yesterday to the possibility of it raising the key interest rate sometime next year. Any rate hikes would almost certainly not occur before the security purchase tapering has been completed. The notion does, however, indicate that the Fed may be feeling good about economic prospects and may look to move quickly in order to contain inflation.
Inflation has already become a problem. Although the Fed has said it believes that inflationary pressures may be “transitory” in nature, there simply is no telling how high inflation could get before the Fed takes action. As is usually the case, the central bank may also already be a step behind the curve and could even be unable to quell inflation through traditional changes to monetary policy. Whatever the Fed does, markets are likely to become upset as the era of free money disappears. That could lead to a widespread rotation of assets that could see a dramatic decline in stocks as alternatives such as gold receive those funds en masse.
Big changes are on the way. When these changes start to occur, the current investor mindset will change significantly. As investors begin to exit and even shun stocks and risk assets, they may have nowhere to turn to other than physical gold. Bullion could see a rapid and significant rise in value that could put it out of reach of many investors. This means that now is the time to get involved, right now.
Adding gold to your portfolio has never been easier than it is today and it may never be cheaper. With gold currently trading for less than $1800 per ounce, the price of gold today could prove in the long-term to be a rock bottom bargain basement deal. If you want to secure your financial future while protecting your portfolio from inflation and dollar weakness, now is the time to act.
All of the current Fed discussions are nothing but noise. The most successful investors just learn to ignore the noise and remain focused on the long-term. This “forest through the trees” approach may keep you on the right side of the markets while decreasing portfolio volatility and anxiety along the way.