• The Federal Reserve issued its third and final rate cut for 2024
• Lingering inflation, dropping stock markets, and high interest rates are increasing investor uncertainty
• Gold and silver held in a Gold IRA offer long term protection from the Fed’s monetary policy

Fed’s Final Cut

In its third and final rate cut of 2024, the Federal Reserve reduced interest rates by 0.25 percentage points. This marks the conclusion of an aggressive cycle of rate hikes aimed at curbing record-high inflation. However, despite this move to stimulate the economy, stock markets responded negatively, continuing a 10-day losing streak— the longest since the 1970s.

¹

Stock Market Reaction

Stocks had been hitting record highs earlier in the year. But the recent rate cut did little to stop its current slide. The Dow Jones Industrial Average had its biggest drop since August and its longest losing streak since 1974. Similarly, the S&P 500 and the Nasdaq have also fallen, with losses intensifying as the day progressed.

Traders had hoped the Fed would continue aggressive rate cuts in 2025. But the expectation of more rate reductions was quickly dampened by the Fed’s cautious outlook.

Bond Yields and Inflation Concerns

After the cut, Treasury yields rose, signaling market expectations of higher inflation. Rising bond yields typically make bonds more attractive to investors compared to stocks. A shift from stocks to bonds can lower stock market performance. And fuel the ongoing market decline.

Future Cuts Uncertain

The Federal Reserve signaled they are almost done with rate cuts. They’re forecasting just two cuts in 2025, down from four. Their goal is to balance low inflation without sending the economy into a recession. Their projection suggests interest rates could drop to 3.4% by 2026, eventually reaching 3%. However, these forecasts might as well be guesses as fresh data brings new predictions. “As we think about further cuts, we’re going to be looking for progress on inflation,” Powell said. He noted that inflation has remained relatively flat over the past 12 months.²

Unemployment and Inflation Projections

Earlier this year, the U.S. was grappling with rising unemployment and falling inflation. Now, however, things seem to have flipped. Inflation has started to rise again, and unemployment is expected to decrease. The Fed has raised its inflation projections for the end of 2025 from 2.1% to 2.5%. Powell has made it clear that while inflation has slowed, prices are still rising. He said the Fed can only slow the rise of prices. Only a recession would actually lower them.³

Rate Cuts in Trump’s Economy

President Trump has promised more growth through tax cuts, deregulation, and tariffs. Such growth would likely cause more inflationary pressures. This puts the Fed in a delicate position. They may need to raise rates again to control inflation. Only to lower them again to avoid a recession.

This lack of a long-term, disciplined policy approach contributes to economic uncertainty. And heightens the risk of stagflation— a situation where inflation rises while economic growth slows.

The Fed’s Neutral Rate Goal

Powell’s pursuit of a “neutral rate” exposes a lack of clear direction. A “neutral rate” is one that neither stimulates nor hurts economic growth. “We’re pretty sure it’s below where we are now,” Powell said. “But as we move further, there will be more uncertainty about where that is.”⁴

Conclusion

Inflation is still lingering, and interest rates are at their peak for now. Americans can expect little to no relief from high borrowing costs. Mortgage rates and credit card interest rates are unlikely to decrease significantly in the immediate future. And as the Trump economy takes hold, inflation could rise again, causing further strain on household budgets.

In times of economic uncertainty, one way to protect your wealth is through physical precious metals, such as gold. Gold has historically served as a hedge against inflation and market volatility. While the stock market may continue to struggle under the pressure of high interest rates and rising inflation, physical gold offers long-term protection for your retirement funds, especially in a Gold IRA. To learn more about how gold can help safeguard your nest egg in these uncertain times, call us today at 800-462-0071.

Notes:
1. https://www.reuters.com/graphics/INTERESTRATES-AUTOMATED/US-10-YEARS-202412/mypmbqdqlvr/chart.png
2. https://www.wsj.com/articles/transcript-fed-chief-jerome-powells-postmeeting-press-conference-bb0d39dc
3. https://www.nytimes.com/live/2024/12/18/business/fed-interest-rates
4. https://www.investors.com/news/economy/federal-reserve-meeting-december-final-rate-cut-sp-500/

• Development of Central Bank Digital Currencies, aka, a Digital Dollar, is accelerating around the globe
• The U.S. is motivated to develop a digital dollar to avoid losing economic dominance to China in the cyber age
• Deemed inevitable, a digital dollar can be defended against by moving assets into physical precious metals
  China Claims World’s Largest Gold Vein

Rise of the Digital Dollar

The push toward Central Bank Digital Currencies (CBDCs), aka, a Digital Dollar, is reshaping the global financial landscape at lightning speed. With 134 countries exploring CBDCs—including major powers like China piloting massive programs—this shift is more than a trend; it’s a race. But as the U.S. navigates its role in this new digital economy, critical questions arise: What does a “digital dollar” mean for your financial freedom? And more importantly, how can you protect yourself against the risks?

Where the Digital Dollar is Now

– 134 countries, representing 98% of global GDP are exploring a CBDC. That number was only 35 in 2020.
– 19 G20 countries are in the advanced stages of launching a CBDC
– All original members of the BRICS Alliance (Brazil, Russia, India, China, South Africa) are in pilot phase
– Since Russia invaded Ukraine, the number of cross-border wholesale CBDC projects has doubled
– Project mBridge connects banks in China, Thailand, Saudi Arabia, and others using CBDC
– The Digital yuan(e-CNY) is the largest CBDC pilot in the world. In June 2024, the e-CNY did over $986 billion in transactions, four times the amount done in June 2023
– The digital euro is in pilot for domestic use in Europe and internationally¹

²

How About the U.S.

The U.S. Federal Reserve is participating in a cross-border CBDC project. It’s called Project Agora. It connects the Fed with 6 other major central banks. Along with a large group of private financial firms. Fed Chair Powell told the Bank for International Settlements (BIS) Innovation Summit 2021 that ‘way more than half’ of the Fed’s 12 regional banks had ‘active work’ on CBDC.³

What Exactly is a Digital Dollar

A digital dollar is issued by a central bank and controlled by a government. They are different than cryptocurrencies like bitcoin. Cryptocurrencies are decentralized. Their transactions aren’t monitored by one authority. Instead, blockchain technology is used as an independent ledger.

Why Governments Want a Digital Dollar

There are several reasons for countries to adopt a digital dollar. They are promoted as making money more accessible to those outside of the banking system. CBDC are supposed to increase efficiency in domestic and international trade transactions. Making them cheaper and faster. CBDC could allow governments to implement monetary policy faster and more effectively.

Why the U.S. Wants a Digital Dollar

The U.S. wants a CBDC for all the above reasons. But they have another motivation. The U.S. needs to retain its role as the world’s dominant currency. They want to keep all the financial advantages that gives. Policy makers fear that if the U.S. doesn’t take the lead, it will itself locked out of a new electronic financial system. Its leading role would be replaced by China, who is leading the development of CBDCs. China’s first-mover advantages would allow it to determine the shape of this new economic world order. With itself at top and its CBDC as the new primary means of exchange.

Problems of the Digital Dollar

The digital dollar brings problems along with its solutions. The U.S. could lose the ability to track criminal money flows or enforce sanctions.

A federally issued and controlled dollar could make the private banking system obsolete. Major economic disruptions could result.

The digital dollar also creates greater fears about loss of freedom. Both economic and personal. The Federal Reserve could manipulate their digital dollar to control financial behavior. For example, say they want to stimulate consumer spending to avoid recession. They can put an expiration date on dollars. If they aren’t spent by a certain time, they disappear from your account. Or the Fed can implement negative interest rates to force retirement savers to spend their funds. Cyber money also becomes vulnerable to cyber criminals. Billions could be stolen from the safety behind their screens.

Freedom advocates also fear the control a digital dollar would give. Every transaction would be recorded. There would be no more privacy. And there could be consequences for buying something or supporting a cause the government doesn’t approve of. It would be in their power to block the transaction, fine you, or simply erase your funds from the digital ledger without recourse.

Resistance to the Digital Dollar

President-elect Trump is taking the lead to stopping an American digital dollar. He stated, “As your president, I will never allow the creation of a central bank digital currency.” He continued, ” Such a currency would give the federal government – our federal government – the absolute control over your money. They could take your money, you wouldn’t even know it was gone. This would be a dangerous threat to freedom – and I will stop it from coming to America.”⁴

Legal analysts have stated that the Federal Reserve does not appear to have legal authority to issue a CBDC without congressional authorization. And Fed Chair Powell said he would not issue a digital dollar without Congressional approval.

The House of Representatives already voted to stop the Fed from issuing a digital dollar. House Democrats fought hard to stop the bill. But the bill has not yet been addressed in the Senate. Right now, the Republicans hold a slim majority. A majority that may disappear in two years. Afterwards, Congress would have a free hand to push their digital dollar agenda.
Fearful of the federal government, states are fighting back against a digital dollar. Florida, Missouri, and Tennessee have introduced bills to ban or limit the use of CBDCs.

Conclusion

The global financial system is going digital. The U.S. may ultimately be forced to join the Digital Dollar movement to avoid being shut out of the new economy. Currently, President-elect Trump, Republicans and some states are resisting being dragged into the digital dollar world. But the change may be inevitable. That’s why it is important to do something now to protect your assets. Owning physical precious metals gives you a safe haven asset that is immune from the hazards of the digital dollar. A Gold IRA gives you the means to protect your funds for the long term. To learn more, call us today at 800-462-0071.

Notes:
1. https://www.atlanticcouncil.org/cbdctracker/
2. https://www.atlanticcouncil.org/cbdctracker/
3. https://www.bis.org/press/p240403.htm
4. https://www.globalgovernmentfintech.com/trump-pledges-to-block-potential-us-central-bank-digital-currency/

• China claims to have discovered the largest gold vein in the world.
• The discovery strengthens China’s de-dollarization ambitions.
• Americans can defend against the economic impact of lost U.S. supremacy with physical gold held in a Gold IRA.

China Claims World’s Largest Gold Vein

China has struck gold—literally—and the shockwaves could shake the global economy. China recently announced the discovery of a massive deposit of high-quality gold ore. It is estimated to possess 1,000 tons of gold worth $83 billion. Making it the largest known gold deposit in the world. The discovery has the potential to affect everything from China’s ambitions to your retirement account. ¹

Gold prices surged on the announcement. And the potential new massive supply raised questions about gold’s continuing upswing. Yet, the World Gold Council (WGC) was quick to doubt the find. They say the claim is ‘aspirational’. And much more drilling would be needed to turn this into a reserve. In addition, the WGC says Chinese mineral reporting standards don’t match global frameworks. “Even if proven, such a deposit would take years to bring into production,” they concluded. ²

Impact on Gold Market

Further analysis deflates concerns about oversupply. The global gold market produces 3,600 tons a year. It would see little impact from a mine producing 15 to 30 tons a year (roughly 1% of supply).³

⁴

China is already the world’s largest gold producer but is facing a decline in output. This a problem for them because Chinese gold consumption surpasses their mining capacity.
China’s gold jewelry demand rose 10% last year, while bar and coin investment rose 28%.

To get an idea of the size of the Chinese market, in the last two years, overseas purchases were about equal to a third of the gold held by the U.S. Federal Reserve. To meet demand, they need significant imports from Australia and South Africa. The newly discovered Wangu vein could reverse that trend and extend their reserves.⁵

China’s Gold Ambitions

China’s gold strategy is shrouded in mystery. The People’s Bank of China paused its gold buying spree earlier this year. They bought record-setting amounts of gold for 17 straight months. Now, analysis shows that China has continued buying gold secretly on the London Bullion market through bullion banks. The secret buying exploded after sanctions froze Russia assets in 2022 after the Ukraine invasion.

Analysts theorize that gold plays an essential role in China’s economic and political ambitions. Acquiring gold would fortify an economy in the grips of several financial crises. Greater gold reserves enhance China’s economic leverage and resource security. It also furthers their goal to usurp America’s role of global economic leader. Gold allows them to accelerate de-dollarization. Turning the renmibi into the dominant currency for international trade and foreign reserves.

Gold to Continue to Climb

Up 30% year-to-date, gold prices are spiking. Western investment is only now catching up to the East’s. Demand is driven by inflation fears, global conflicts, national debt concerns, and lowering interest rates. Yet, China’s insatiable demand underpins it all. And experts believe there is still more room to grow due to limited investment options for Chinese.

Managing director of Hong Kong based Precious Metals Insights said, “The weight of money available under these circumstances for an asset like gold… is pretty considerable. There isn’t much alternative in China. With exchange controls and capital controls, you can’t just look at other markets to put your money into.”⁶

Conclusion

China is known for playing the long game – focusing on steady, long-term growth in all aspects of national power. They aim to create a multipolar world where it stands as an equal or superior to the United States. This new gold bonanza feeds into that vision, assuming they can develop it.

Instead of lowering gold prices by opening this new reserve to the world, China may very well keep it for domestic consumption. If their projected demand continues, a perfect storm for gold prices will form. And, with newfound Chinese resource security, an increased threat of de-dollarization along with it.

Americans can protect against the impact of this Chinese lucky strike. They can move into gold and away from dollar denominated assets put at risk by de-dollarization and a more expansive, aggressive China. Call American Hartford Gold today at 800-462-0071 to learn how a Gold IRA can protect your retirement funds.

Notes:
1. https://www.livescience.com/planet-earth/geology/supergiant-gold-deposit-discovered-in-china-is-one-of-the-largest-on-earth-and-is-worth-more-than-usd80-billion
2. https://www.mining.com/chinas-super-giant-gold-discovery-claim-sounds-aspirational-wgc-expert-says/
3. https://www.mining.com/chinas-super-giant-gold-discovery-claim-sounds-aspirational-wgc-expert-says/
4. https://mining.com.au/massive-china-discovery-could-change-global-gold-market/
5. https://fortune.com/2024/04/21/gold-price-outlook-record-high-china-demand-consumers-investors-pboc/
6. https://mining.com.au/massive-china-discovery-could-change-global-gold-market/