America isn’t the only country where investors are turning to safe haven assets in the face of shaky local and global economic conditions.
Chinese investors just sent gold imports soaring by 65% on an annual basis in the first quarter of 2017.
Why? The China Gold Association’s official statement said the reason was “increased public awareness of buying gold bullion as a safe haven asset.”
At a time when gold production in China is on the decline, the demand spike is so strong that imports actually doubled month over month in March.
No wonder, then, that gold and silver prices in 2017 have done so well versus the S&P 500. Some experts are betting that uncertainty in the U.S. and abroad will likely keep gold prices elevated all year.
While many individual investors have been fixated on the stock market rally and Trump’s first 100 days, retirement investors in gold and silver have had plenty to celebrate.
DISHEARTENING ECONOMIC NEWS KEEPS FED CAUTIOUS OF EXTRA RATE HIKES
During the first quarter, the U.S. economy grew at the slowest pace in three years as weak auto sales and lower home-heating bills acted as a drag on consumer spending and offset a pickup in the housing and oil drilling sectors.
Gross domestic product, the value of all goods and services produced, rose only 0.7% in the first quarter after advancing 2.1 percent in the prior quarter. Consumer spending, the biggest part of the economy, rose an anemic 0.3 percent, the worst performance since 2009.
Bad news for the economy can be great news for gold investors. Weaker-than-expected growth undercuts the Federal Reserve’s case to raise interest rates at a fast pace this year. Investors are increasingly uncertain about the current administration’s pledges to cut taxes and boost infrastructure spending… will they actually be realized in the face of mounting opposition?
Economists are also skeptical that growth will reach President Trump’s goal of 3-4% on a sustained basis. While some of the economic slowdown may be temporary, inflation is eating into consumers’ wallets. Gold, a hedge against inflation, stands to benefit from any increase in inflation. Analysts at Standard Bank warn that if Trump’s legislative agenda is bogged down, gold will head above $1,300 an ounce in coming months.
TODAY’S STOCK MARKET PRICED BEYOND PERFECTION
Jim Grant, publisher of “Grant’s Interest Rate Observer,” thinks that the horse of stock market speculation is ahead of the cart of enterprise. In simple terms, rising stocks have created an illusion of economic prosperity, but the actual underlying economy is a mess.
According to Colin Cieszynski, senior market analyst at CMC Markets Canada, the Federal Reserve is faces the prospect of weak growth ahead and rising inflation.
Author James G. Rickards cautions that today’s stock market is priced at or beyond perfection. The Dow Jones Industrial Average (DJIA) is trading around 12% higher than election night. Either economic growth will accelerate based on the Trump proposed tax-cuts and stimulus spending or the markets will fall precipitously once investors realize the growth is not coming.
Rickards expects a violent stock market correction, a falling dollar and major rallies in bonds and gold. He believes that the root of any financial collapse is investor psychology that can trigger sudden shocks and financial system instability.
Right now he believes investors have been lulled into complacency, at a time when the financial system is highly unstable due to over-leverage and non-transparency. According to Rickards, investors should buy gold now. He advises to stay focused on the long-term trends that favor gold: deficits as far as the eye can see, geopolitical uncertainty, rising inflation and the growing disconnect between Main Street and Wall Street.
ANALYST: STRONG GLOBAL DEMAND FOR GOLD TO CONTINUE
Prathamesh Mallya, Chief Analyst at Angel Commodities Broking, expects strong demand for gold to continue and support gold prices going forward. In uncertain times, gold is the safe-haven asset of choice.
In fact, owning physical gold and silver can be one of the only safe harbors when the next stock market correction hits. Fears of war with North Korea are growing and global conflict could erupt at any time. U.S. economic and political policy seems to be at a serious crossroads.
Can you afford not to consider all worst-case scenarios when it comes to your hard-earned money?
