• Inflation continued to rise according to the most recent Labor Department Report 
• Inflation is eating away at the value of retirement plans, eroding more tan 10% of value during 2022 and 2023 
• Gold is proving itself a hedge against inflation and continues to break all-time highs 

Inflation Continues to Rise

The Labor Department’s most recent CPI report painted a grim picture. Higher than expected prices showed that inflation is more stubborn than thought. The stock market immediately dipped upon the news as hopes for interest rates cuts were dashed. Retirement savers are facing a precarious new reality as we seem to be entering a ‘no-landing’ state of permanent inflation.

Overall inflation and core inflation, with volatile food and energy costs removed, both remained well above the Fed’s 2% target. Headline CPI rose 3.5% from a year ago. That’s up considerably from February’s 3.2% rate. Core price inflation came in at 3.8%. Service prices were up 5.4% from last year. In effort to get a better picture of the economy, economists started the ‘supercore’ measurement. This new computation takes core services and subtracts housing. That number surged 7.2% at an annualized pace. ¹

²

Economists suspect the previous easing of inflation was due to falling oil prices. But gasoline prices rose again in March as OPEC+ extended supply cuts and the Middle East conflict grew.

Inflation and the Stock Market

Over the past few months, investors had high hopes for imminent rate cuts. The Fed had signaled the possibility of cutting interest rates three times this year. In January, the CME FedWatch Tool indicated a 73% chance of a 25-basis point rate cut by the Federal Reserve as early as March. This optimism fueled a stock market frenzy. With the release of this latest inflation report, that surge was brought to an abrupt halt.³

The Dow Jones Industrial Average fell more than 500 points. The Nasdaq and the S&P 500 also dropped. Tech stocks, including Microsoft, Amazon and Apple, were lower. The CME FedWatch Tool now show 78% of participants expect the Fed to hold rates steady in June. The markets are now hoping for a rate cut in September. Though there is now a possibility of no interest rate cuts this year – further stagnating the economy.⁴

Interest rates are also taking on a political overtone. Some economists point out that a well-timed cut could give a crucial boost to the economy when it comes voting time. Seema Shah is the chief global strategist at Principal Asset Management. She said, “Today’s crucial CPI print has likely sealed the fate for the June [Fed] meeting with a cut now very unlikely. Even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making.”⁵

Markets historically drop when interest rates are kept longer for higher. This is because it costs more for companies to borrow money and other investments may look better compared to stocks.

Inflation Impact

Continuing inflation is placing severe pressure on most US households. Prices have increased on everyday necessities. In the past few years, the cumulative consumer price index has increased a whopping 18.49%. ⁶

Lingering inflation is taking a heavy toll on retirement savings. The damage goes beyond falling portfolio value as stocks plummet. Warren Buffets said, “Inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to simply consume capital.”⁷

And the math bears it out. Let’s consider an IRA with $100,000 as an example. Just accounting for 8% inflation in 2022, and 4.1% in 2023, the account would have lost $11,772. More than 10% of your retirement savings would have vanished in two years. That money is going to continue disappearing as inflation remains elevated. In addition, higher-for-longer interest rates are likely to keep driving stock values down and increase the chance of recession.

Conclusion

So-called ‘sticky’ inflation presents a real threat to retirement savings. The economy is finding itself in a ‘no-landing’ situation. Continued growth and a tight labor market are working to prevent a decline in inflation. Meanwhile, the most aggressive interest rate hikes in decades haven’t stopped inflation. Instead, they have brought us to the brink of recession.

One stand out in this mess is gold. It is proving itself as a true hedge against inflation. As purchasing power continues its descent, the price of gold keeps breaking record highs. For those people who want to protect the value of their portfolios from the ravages of inflation, now is the time to investigate what gold can do for you. A Gold IRA is designed to maximize your protection from inflationary forces. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:

1. https://www.foxbusiness.com/economy/march-inflartion-report-another-month-hot-price-gains-expected
2. https://www.foxbusiness.com/economy/march-inflartion-report-another-month-hot-price-gains-expected
3. https://www.cbsnews.com/news/interest-rates-today-mortgage-goldman-sachs/
4. https://www.foxbusiness.com/markets/stocks-sink-after-hot-march-inflation-data
5. https://www.cnn.com/2024/04/10/markets/markets-fall-cpi-inflation-report/index.html
6. https://www.foxbusiness.com/economy/march-inflartion-report-another-month-hot-price-gains-expected
7.https://www.goodreads.com/author/quotes/756.Warren_Buffett?page=5#:~:text=the%20arithmetic%20makes%20it%20plain,ability%20to%20simply%20consume%20capital.

 

• The Congressional Budget Office warned of a severe national debt crisis
• A debt crisis can result in sky high inflation, a devalued dollar, record taxes, and deep cuts in government services like Social Security
• Americans are flocking to physical precious metals to protect the value of their retirement funds from the debt crisis.

Congressional Budget Office Warns of Debt Crisis

US government borrowing has hit unprecedented levels and threatens to leave “scars on our society and economy” for decades to come. The total US national debt is around $34.5 trillion. Forty years ago, it was “only” around $900 billion. Based on forecasts, the national debt will grow to an astonishing $54 trillion in the next decade. With uncontrolled debt potentially leading to sky high inflation, a worthless dollar, and reduced Social Security, Americans are turning to physical precious metals to protect their retirement funds.¹

The federal debt relative to gross domestic product will likely rise above World War 2 levels by 2029. Currently, the debt to GDP ratio is 99%. That is predicted to shoot up to 123% by 2034. And that’s the optimistic prediction. It could go as high as 134% in 2034 or 185% by 2050. The head of the independent Congressional Budget Office (CBO) warned the debt could trigger a damaging market reaction if something wasn’t done.²

³

Bloomberg Economics found that in 88% of a million simulations, the national debt is on an unsustainable path. A recent CBO report highlighted that skyrocketing debt combined with high interest rates means the country might not be able to afford crucial borrowing in the future.⁴

The costs of servicing the debt are anticipated to soar. It is likely to triple from approximately $475 billion in fiscal year 2022 to a remarkable $1.4 trillion by 2032. By 2053, interest payments are forecasted to surge to $5.4 trillion, surpassing the combined expenditure on essential programs like Social Security, Medicare, Medicaid, and other mandatory and discretionary spending. That’s factoring in spending on Medicare and other major health programs are projected to rise more than 40% in the next 30 years.⁵

Some economists try to say there is no crisis. They say that since the dollar is the world’s reserve currency, there will always be someone to who wants to buy our debt. But this may not hold true forever. The CBO continued to say that the uncontrolled debt could “erode confidence in the US dollar as the dominant international reserve currency.” Combined with the rising de-dollarization movement , the US may find itself unable to raise crucial funds in the future.⁶

The Government Accountability Office said that now is the time for Congress to address the issue. They said, ” The sooner actions are taken to change the long-term fiscal path, the less drastic they will need to be.”⁷

Conversely, the current lack of political will may result in the government needing to take extreme measures. Measures that the CBO said, “would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel more constrained in their policy choices.” In other words, expect deep spending cuts is Social Security and defense along with dramatically higher taxes. ⁸

Bloomberg noted that action may not be taken until we are amid a crisis, saying, “that’s playing with fire.” The vice dean of research at the Wharton School said that crisis is likely to occur in 2030. It could happen as early as 2025 if the next presidential administration launches a new expensive fiscal package.

Wall Street Warnings

The private sector has been weighing on the simmering debt crisis. JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Brian Moynihan, and Blackrock CEO Larry Fink have all warned about the severity of the problem. Citadel founder and CEO Ken Griffin said, “As we have cautioned over the past year, the surging US public debt is a growing concern that cannot be overlooked. It is irresponsible for the US government to incur a deficit of 6.4 percent when unemployment is hovering around 3.75%. We must stop borrowing at the expense of future generations.”⁹

Wharton Professor Joao Gomes foresees a fiscal crisis soon. The forced government response would cause inflation to spike and the dollar to collapse. “These measures would have a further devastating effect in the economy, leading to a decade long stagnation,” Professor Gomes explained. “Its consequences will be severe and leave lasting—probably irreversible—scars on our economy and society.”¹⁰

Conclusion

The national debt is continuing its inevitable climb to crisis. The government is now warning itself that our country’s current trajectory is unsustainable. But still no action is being taken. Facing inflation spikes, tax increases, cut services, and a devalued dollar, Americans are being left to fend for themselves. That is why so many are flocking to physical precious metals to protect the value of their retirement funds. Call American Hartford Gold today at 800-462-0071 to learn how a Gold IRA can safeguard your financial future from the severe consequences of our runaway national debt.

Notes:

1. https://www.foxbusiness.com/economy/million-simulations-show-us-debt-is-on-unsustainable-path
2. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
3. https://twittercom/dailychartbook/status/1774815483142787160
4. https://www.semafor.com/article/04/02/2024/skyrocketing-us-debt-could-trigger-market-shock-cbo-chief-says
5. https://www.foxbusiness.com/economy/million-simulations-show-us-debt-is-on-unsustainable-path
6. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
7. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
8. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/
9. https://www.foxbusiness.com/economy/hedge-fund-billionaire-says-us-debt-growing-concern-that-cannot-be-overlooked
10. https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/

• Gold prices have reached three back-to-back all-time record highs within the last few weeks alone
• Major banks such as JPMorgan and Goldman Sachs say we are in a commodities ‘supercycle’
• The Fed is signaling rate cuts even as inflation rises, and growth continues – creating a perfect support for gold demand

Gold Hits Record High Prices

Gold prices skyrocketed to a new all-time historic high of $2,222 after the Federal Reserve signaled a new dovish stance. The surge in gold prices confirmed predictions that we are in a new commodities supercycle. Gold prices are forecasted to keep rising as the stock market creeps closer to a crash. ¹

²

Interest Rates and Gold

Though the Fed is maintaining interest rates at 5.5% for the time being, Fed Chair Powell confirmed that 3 interest rate cuts are likely this year. The cuts could start as early as this summer.

The Fed dot plot shows a decrease to below 3% in the coming years. The Fed dot plot is a visual representation of Federal Reserve officials’ projections for future interest rate changes. It illustrates their individual estimates with dots on a chart. Notably, the cuts are predicted despite their increasing estimates for 2024 GDP growth and inflation.

Historically, gold has a negative correlation to interest rates. When rates drop, gold rallies. This reflects gold’s appeal as an alternative to interest-bearing assets. Some are interpreting this as a shift in their inflation fight. This shift creates a perfect scenario for gold to grow – lingering inflation and lowering interest rates.

Gold Hits New Highs Amidst Supercycle

Gold prices hit a new all-time high for the third time this month on the Fed’s announcement. Gold prices have breached $2,159 an ounce, $2,180 an ounce and the $2,222 an ounce mark – reaching three back-to-back all-time record highs within the last few weeks alone. Never before in history has there been multiple all-time record highs in such a short space of time.³

Since 2021, Goldman Sachs, JPMorgan and Bank of America have been calling this the beginning of a new commodities supercycle. They have gone so far as to call commodities the “preferred asset class over the next decade.” Four years later, the commodities supercycle is only speeding up, especially for gold. The yellow metal is positioning itself as one of the best performing asset classes of 2024. ⁴

Analysts at GSC Commodity Intelligence are calling it – “the beginning of a new historic Supercycle for Gold”. Gold is being driven by powerful tailwinds including rising geopolitical tensions and strong central bank purchases. In addition, Chinese demand is growing as their economy become unstable. A high-stakes presidential election is also sending people looking for hedges against upcoming uncertainty. Gold is finding support at above $2,100 and could hold at $2,150. All these factors have analysts thinking gold will reach $3,000 an ounce faster than anyone expects. ⁵

Rate Cuts, Uninverted Yield Curve & Recession

The inverted yield curve has long been a reliable recession warning. This abnormal pattern of short-term Treasury bonds yielding more than longer-term ones has been projected to end by December 2024. That is according to a Reuters poll of 62 bond strategists. The Federal Reserve’s rate cuts are likely to revert the curve back to its customary upward-sloping direction. Recession usually occurs when the curve “uninverts”.

The last two “uninversions” were in August of 2007, followed by the Great Recession, and in the fall of 2000, followed by the ‘Dot-bomb’ recession in 2001. After 2000, gold went on to outperform the stock market for the next twelve years.6

Politically Motivated Cuts

While the Fed has maintained a data driven decision making process, some analysts are assigning political motivations. A dovish turn would boost the market and make investors, large and small, happier with the current administration. Also, it would delay the onset of the impending recession until after the election. Thus, sparing the administration the damage a recession would cause to election chances.

In addition, a cut in rates will help ease the growing pressure they are facing to deal with the astronomical national debt. Across the board, the debt is being recognized as an existential existential crisis for the country.  By reducing rates, the cost to service the debt will decline, and buy the government more time to kick the can down the road. Ultimately though, the market will fall, recession will begin, and the national debt will have to be dealt with. When that time comes, the demand for safe haven gold is likely to spike.

Conclusion

The gold supercycle is revving up. The precious metal continues to rapidly break all-time high prices. Economic conditions support the upward trajectory. At the same time, the stock market is in the ninth inning of a bull market. Americans have a choice between speculating and getting out before the bubble bursts or buying into a bullish trend likely to continue for years to come. Now is the time to investigate how a Gold IRA can capitalize on the precious metal’s upswing. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:

1. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
2. https://twittercom/FT/status/1765135315470098443
3. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
4. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
5. https://www.fxstreet.com/analysis/gold-prices-hit-yet-another-all-time-record-high-is-3-000-a-possibility-video-202403221521
6. https://www.ai-cio.com/news/yield-curve-will-right-itself-finally-but-not-until-year-end-experts-say/