• Subjective inflation data is used to try and predict which way the markets will go
• Wall Street traders see inflation going down vs. the Fed who thinks inflation will linger
• As a result, the only thing investors can count on is higher market volatility

What Inflation Data Means to Investors

Before every Consumer Price Index inflation report comes out, there is tense speculation. Is inflation falling or rising? Will the market rally or collapse? Every bit of data is analyzed to determine what the Fed will do next. Even though the Fed clearly states their position. There is what the markets want and what the Fed wants. Somewhere in between, lies the best course of action to protect the value of your retirement funds.

Economic data so far has been unclear. Overall inflation is dropping. But core inflation, the rate when volatile fuel and food have been removed, is increasing. Wage growth is easing which should reduce inflation. Yet unemployment is also easing, which means inflation should remain steady.

Based on trade data, Wall Street expects inflation to fall faster than economists and Fed officials do. The Fed Fund Futures market bets on the inflation rate. It sees inflation coming down to 2.5% in the next seven months.

Federal Reserve projections say inflation will remain well above 3% until 2024. Fed officials have clearly signaled that interest rates must be raised above 5% to hit their 2% inflation target.¹

Investors seem to be forgetting a basic rule. Don’t fight the Fed. The disconnect between Wall Street and the Fed will result in more market volatility ahead. “I think at some point the markets will realize, ‘oh we can’t get to 2%,” and then the markets probably do sell off on that. I think maybe in short term [the stocks go] up and then in the second quarter, they go back down as people realize that 2% is not realistic,” said chief strategist at Spouting Rock Asset Management.²

BlackRock is the world’s largest asset manager. They have $10 trillion in assets under management. They warn that investors are underestimating the threat of stubborn high inflation and elevated interest rates. They see inflation running hot well into 2023. The firm sees little chance of the Federal Reserve cutting rates even if the economy slides into recession. “Even with a recession coming, we think we are going to be living with inflation,” they wrote. “We do see inflation cooling as spending patterns normalize and energy prices relent – but we see it persisting above policy targets in coming years.”³

As the ‘will they’ ‘won’t they’ debate plays out about interest rate hikes, the market continues to struggle. All three major indexes fell this past year. The Dow Jones Industrial Average ended the year down 8.8%, the best of the three. The S&P 500 sank 19.4%, while the tech-heavy Nasdaq Composite plunged 33.1%.⁴

Longest Bear Market in History

A study by Motley Fool shows that this may turn into the longest bear market in history. Most bear markets turn around in under a year. As of the closing bell on Jan. 4, 2023, the S&P 500 had spent 282 calendar days in a bear market. And it doesn’t look close to hitting bottom. The Fed published its “Summary of Economic Projections.” It said not to expect interest rate easing until 2024. If that’s the case, and the S&P 500 adheres to this century’s average timeline to find a bottom, we’re talking about a bear market that could easily top more than 1,000 calendar days. It will become the longest on record. As of now, the longest bear market occurred between 2000 and 2002 and lasted 929 calendar days.⁵

Wall Street vs. the Fed. Optimism vs. history. With all the subjective data, the path to protecting the value of your retirement funds doesn’t seem clear. 99% of us aren’t in a position to know the whole truth. Investors should tune out the noise and rely on what is tried and true. The one safe haven asset that outperformed a sinking market this past year is gold. Contact us today to learn how our Gold IRA can preserve the value of your funds, no matter what Wall Street or the Federal Reserve does.

Notes:
1. https://www.cnn.com/2023/01/11/investing/premarket-stocks-trading/index.html
2. https://www.marketwatch.com/story/why-thursdays-u-s-cpi-report-might-kill-stock-markets-hope-of-inflation-melting-away-11673449025
3. https://www.foxbusiness.com/markets/markets-may-be-underestimating-threat-high-inflation-blackrock-warns
4. https://www.foxbusiness.com/markets/markets-may-be-underestimating-threat-high-inflation-blackrock-warns
5. https://www.fool.com/investing/2023/01/08/this-may-be-the-longest-bear-market-in-history/

• Record losses were recorded across stocks, bonds, real estate and crypto
• Federal Reserve policy sent assets plummeting to their true value
• Investors turn to gold, which is poised to enter a bull market

Epic Losses Across Asset Classes

A Financial Times report found that a traditional portfolio consisting of 60% stocks and 40% bonds will have seen its worst performance since 1932. More than $12 trillion in value was erased from the US stock market last year. In other words, it hasn’t looked this bad since the Great Depression. Plummeting stocks were joined by bonds, crypto and real estate. The ‘everything bubble’ has burst and investors are scrambling to adapt.

The Federal Reserve has raised interest rates to their highest levels since 2007. They stoked mammoth swings across global markets and a steep selloff in assets from stocks and bonds to cryptocurrencies. The Fed’s aggressive interest rate hikes have stopped the flow of ‘free money’ that propped up asset prices. They are now sinking to their true value.

Sound Planning Groups’s CEO said, “I’m calling it the Federal Reserve bubble. I believe that there is a bubble in the stock market, there’s a bubble in the bond market here today. We’ve got a real estate bubble, and that’s also hurting corporations as we look at how they are no longer able to borrow at such low-interest rates.”¹

The once booming tech sector led the securities nosedive. A handful of tech stocks were responsible for almost a quarter of the market’s total decline. Giants such as Netflix, Meta, Zoom, Spotify and Tesla saw their share prices falling in the range of 51% and 70%, according to Yahoo Finance. Formerly bedrock stocks like Microsoft are now seen as “risk assets.”

The impact of Federal Reserve rate hikes is beginning to ripple through the real estate market. Rising mortgage rates are crushing demand. The Federal Housing Finance Agency shows that U.S. house prices were stagnant through September and October.

Crypto was once called Gold 2.0 because of its supposed resilience to market volatility. The total crypto market cap fell from $2.25 trillion to $798 billion throughout the year. That represents a drop of 64.5%, and crypto billionaires recorded huge losses.²

Money managers say they are positioning for an environment that bears little resemblance to the one to which many grew accustomed after the last financial crisis. The era of ultralow bond yields, mild inflation and accommodative Fed policy has ended.

There is a belief that we are entering another ‘lost decade’. The term “Lost Decade for Stocks” refers to the ten-year period from 12/31/1999 through 12/31/2009, when the S&P 500 generated an annualized total return of -0.9% over the period. This was only the second time that the market had a negative total return over a decade period. The other period was the Great Depression decade of the 1930s.

Gold Alone Is Set for a Bull Market

In a climate that is prioritizing wealth preservation over profit, traders are turning to gold. Gold prices have been on an incline since November. Analysts think we are entering the ‘Goldilocks’ zone for gold. They theorize that the Fed will stop raising interest rates as inflation plateaus and recession concerns increase. Flattened interest rates will result in less appealing Treasuries and a weaker dollar. Investors will return to gold to shield their wealth in the face of continued inflation.

Eric Strand is the portfolio manager and creator of the European-listed AuAG ESG Gold Mining exchange-traded fund. He said, “We anticipate a new all-time high for gold during 2023 and the start of a new secular bull market when the price goes over $2,100 per ounce.”³

Investors are facing the fallout of the bursting everything bubble. Our Gold IRA can shield your wealth as this new economy takes shape. Contact us today to learn more.

Notes:
1. https://www.foxbusiness.com/economy/stock-market-kicks-off-2023-with-start-of-lost-decade-expert-warns
2. https://cointelegraph.com/news/everything-bubble-bursts-worst-year-for-us-stocks-and-bonds-since-1932
3. https://www.kitco.com/news/2022-12-19/Gold-will-explode-higher-in-2023-but-it-s-the-miners-investors-should-pay-attention-to-ESGO-s-Eric-Strand.html

• Gold hit record highs in 2022, and rebounded strongly after a mid-year dip
• Gold outperformed almost every other asset class in 2022
• Several factors are aligned for gold to reach new record prices in 2023

Gold in 2022

Gold had a remarkable 2022. Bullion soared 16% between the end of January 2022 and the beginning of March. It traded above $2,070 per ounce for the first time. Investors flocked to gold as safe haven when Russia invaded Ukraine. After interest rate hikes caused a dip, gold rebounded towards the $1,800 level. Since the beginning of November, gold prices are up almost 13%. Analysts predict the surge to continue into 2023.¹

The Fed’s fight against inflation put downward pressure on gold prices. They aggressively raised interest rates to shrink the economy. Higher interest rates saw investors move away from gold and toward interest bearing securities. Also, the U.S. dollar climbed toward its 20-year high. Gold prices are inversely related to the dollar. When the dollar goes up, the price of gold goes down.

At $1,800 in December, gold was a winner compared to other markets. Stocks, bonds, cryptocurrencies, real estate, and most other asset classes suffered significant losses in 2022. Gold’s 2022 performance in the face of a strong dollar and high interest rates is a testimony to its strength.

Gold in 2023

Gold is primed to continue its leading role due to several factors, including:

Inflation has been at record levels for almost a year. It will continue to persist for the foreseeable future. Gold is traditional store of value in the face of inflation. As long as inflation stays elevated, the upward price pressure will continue.

Interest rates are predicted to plateau in 2023. Investors believe the Fed will hit the brakes on interest rate hikes as a recession settles in. Gold will become more attractive compared to other interest-bearing investments.

Supply is not keeping up with international demand. Russia was the world’s third leading gold supplier. With sanctions still in effect, scarcity is increasing. In addition, investment in new gold sources has not kept pace with demand.

Dedollarization is seeing non-Western countries move away from using the US dollar as a reserve currency. Sanctions and a global political realignment are causing countries to choose gold for economic and security reasons.

China is relenting on their strict covid restrictions. China is the world’s top consumer of gold. As the restrictions loosen, their demand will increase.

Central banks purchased a record 399 tons of gold for about $20 billion in Q3 2022. Over the first nine months of 2022, total official sector purchases were at the 673-ton level, the highest since 1967. The robust demand for gold from central banks is likely to continue in 2023 according to the World Gold Council.²

Overall, gold is primed to have a banner year in 2023. Analysts say gold can hit the $2,000 level. Saxo Bank said, that with the right conditions, gold will break $3,000 an ounce next year. How high gold will go depends on the Fed’s actions on interest rates.

In the best-case price scenario, gold could even surpass its all-time high if stagflation occurs and the Fed reduces its tightening. This would likely force investors to steer clear of bonds, equities, and currencies altogether, just like in the 1970s. Now is an opportune time to get it into gold for the new year. Contact us today to learn how you can take advantage of the price upswing with our Gold IRA.

Notes:
1. https://www.investing.com/analysis/gold-could-continue-its-run-in-2023-200633836
2. https://www.investing.com/analysis/gold-could-continue-its-run-in-2023-200633836

• After a volatile 2022, silver prices are set to surge over the next few years
• Skyrocketing demand and limited supply are pushing silver prices up
• Investors are turning to silver alongside gold for its safe haven qualities during economic uncertainty

Experts are Bullish on Silver

If you don’t have silver in your portfolio, now is the time to add it. After a volatile year, silver prices are set to surge. Exponentially increasing demand, limited supply and continued economic uncertainty could send silver into record territory.

Silver earned its nickname as the ‘restless metal’ in 2022. After recovering from price drops, silver demand spiked to an all-time high. It’s been on an upward trend since mid-October, adding 30% to its price. The rise was partially fueled by news that China is loosening its Covid restrictions.

Silver prices were also boosted by the prospect of lower interest rates in the future. Like gold, silver tends to go down when rates go up. That’s because investors are drawn to interest bearing assets over precious metals.

The upswing in silver prices coincided with news that demand is projected to hit a new record of 1.21 billion ounces.¹ This will result in a second year of supply deficit. “At 194 million ounces, this (deficit) will be a multi-decade high and four times the level seen in 2021,” a recent report from the Silver Institute states. Global silver output is projected to increase by only 1 percent. Any fresh supply will be quickly absorbed. Mining production is being limited by skyrocketing costs for energy, supplies and transportation.²

“Silver is in a unique place. Many factors are transitioning silver into an industrial metal. This, with supply issues, government regulations and current pricing, is poising silver for a breakout.” says Steve Cope, President & CEO of Silver Viper Minerals.³

Growing Demand

Industrial demand accounts for half of total silver consumption. Silver is vital to the production of solar power cells. The market for photovoltaics alone could support the surge in the metal’s price. This demand will grow as government’s push renewable energy policies. The European Commission just mandated rooftop solar panels be installed on all public and commercial buildings in the next five years.

Silver demand is also being driven by the electric car market. Electric vehicle manufacturer’s need for silver will climb from 45 million ounces in 2017 to 70 million ounces by 2030.⁴

Investment demand for silver is increasing as well. Investors are turning to silver for the same reason they look to gold – to hedge against inflation and risk. Sales of silver coins and bars for investment jumped 36%. Investors bought 278.7 million ounces, the highest amount since 2015. “Retail investors in North America and Europe, motivated by safe-haven and inflationary concerns, took advantage of periodically lower silver prices to purchase coins and bars,” said the Silver Institute.⁵

Frank J. Basa is Chairman & CEO of Canada Silver Cobalt Works. He said, “I expect that increasing demand for silver for solar panels, along with growing investor interest for silver as a hedge against inflation, will together drive the price of silver higher in the coming year.”⁶

Future Silver Prices

Analysts forecast silver will hit $34 in 2023. Some are predicting that it will break $48 by 2024 under the right conditions. Silver will move higher as the dollar drops and inflation remains high.

Data indicates that silver is likely to outperform gold in 2025 and 2026. Silver is historically undervalued relative to gold right now. Making it an attractive investment opportunity. Supply trends cannot keep up with longer-term demands. Green technology demands will increase even if there is a global recession.

The gold to silver ratio is also sending a powerful buy signal. The gold to silver ratio represents the number of silver ounces it takes to buy a single ounce of gold. Historically speaking, the gold to silver ratio has rested somewhere between 15 and 10 to 1, reflecting the average supply of each metal.

The ratio now is like what it was just prior to the 2008 financial crisis and recession, when it also hovered around 80. Following the financial meltdown, silver rallied 400% over three years.⁷

Unstoppable demand and limited supply are combining with inflationary pressures to create a perfect storm for silver prices to erupt. You can easily add silver to a self-directed IRA like our Gold IRA. Contact us today to learn more.

Notes:
1. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
2. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
3. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
4. https://capital.com/silver-price-predictions-for-years-ahead
5. https://capital.com/silver-price-predictions-for-years-ahead
6. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
7. https://www.kitco.com/Gold_Silver_Ratio_Charts/gold-silver-ratio-charts.html

• The Federal Reserve raised interest rates .5 percentage points
• Smaller than the previous four increases, this hike signals the inflation fight is far from over
• Investors will need to contend with inflation, high interest rates and recession for years to come

 

Fed Raises Interest Rates

The Federal Reserve raised interest rates .5 percentage points. Only in these twisted times is that considered an easing. True, it is smaller than the four previous .75-point increases. But it is still double the customary quarter-point hike. Prior to this year, the Fed hasn’t raised rates by more than a quarter of a point at a time in 22 years. The Fed has hiked rates six times this year to tame record high inflation. Even though it is smaller, this latest hike will cause pain for millions of American businesses and individuals.¹

This rate hike will bring the overnight borrowing rate for banks to a range between 4.25% and 4.5%. That is the highest it has been since 2007.²

The Fed may be reducing the intensity of the hikes, but the effects will continue long after they stop. The average period between peak interest rates and the first rate reductions by the Fed is 11 months. If the bank stops actively hiking rates, they could remain high well into 2024.

Inflation, as measured by the Consumer Price Index, was up 7.1% on an annual basis. That was below expectations and well below the 7.7% in October. Traders became hopeful that the Fed would pivot on this news. They were therefore disappointed by comments from Fed officials.³

Fed Chairman Powell stated that while the reduction was welcome, he needs substantially more evidence that inflation is being tamed. He continued, “Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.” He also said that Fed policy is not “sufficiently restrictive”, and more hikes are appropriate.⁴

No Relief in Sight

Federal Reserve officials expect inflation to prove more stubborn that predicted. It could stay doggedly high for years to come. They anticipate having to raise rates next year more than planned. Their economic projections show they will need to inflict more economic pain to get inflation under control.

Officials expect to raise interest rates to 5.1 percent by the end of 2023. They plan to keep rates higher for longer as well. You can count on rates staying elevated into 2025. Unemployment is predicted to jump and remain high for years. Growth will be much weaker in 2023. A recession is almost guaranteed.

Retirement funds will continue to be squeezed by the triple threat of inflation, high interest rates and recession. The Fed admits that bringing inflation down from 40-year high levels will be a long, hard slog. Investors can hope the Fed pivots away from their policy. Or they can face facts and prepare for an extended downturn. A Gold IRA can protect your wealth from all three threats. Contact us today to learn how.

Notes:
1. https://www.cnbc.com/2022/12/14/heres-everything-the-federal-reserve-is-expected-to-do-wednesday.html
2. https://www.cnn.com/2022/12/13/economy/federal-reserve-december-meeting/index.html
3. https://www.cnbc.com/2022/12/14/live-updates-fed-rate-hike-december.html
4. https://www.cnbc.com/2022/12/14/live-updates-fed-rate-hike-december.html

• The price of gold rose alongside fears of a global recession
• Both increases are fueled by lingering inflation, interest rate hikes and global uncertainty
• Gold demand is being amplified by central banks looking for safe haven assets

Recession Fears Increase

The price of gold is rising along with concerns about an incoming recession. Persistent inflation, aggressive interest rate hikes and global instability are fueling both increases. Economic leaders are preparing now to make the best from both situations.

CEOs across industries are getting ready for the economic slowdown. JP Morgan CEO Jamie Dimon said inflation is eating up consumer savings. People are running out the money they stockpiled during the pandemic. This will put a damper on consumer spending and slow the economy. In addition, he thinks the Fed’s interest rate hikes meant to curb inflation will push the economy into recession. “It could be a hurricane. We simply don’t know.”¹

Mary Barra, CEO of GM, is also preparing for a collapse in demand. GM will move forward conservatively in 2023 cost-wise. She believes the economy will be plagued by chip shortages and strained supply chains through 2023. And Union Pacific Railroad CEO Lance Fritz says shipping is slowing down and the economy is tightening. “The Fed is trying to hit all of us in the line of fire with a slower economy and hurting demand. It’s not good,” said Fritz.²

Gold Demand Increases

The economic downturn is amplifying the demand for gold. A Kinesis Money market analyst said, “A global recession with a subsequent flight to haven assets should benefit gold, as should a [Federal Reserve] forced to be less aggressive with its rate hikes to avoid tipping the U.S. economy into recession.”³

Saxo Bank made a bold gold prediction. They think a return to a pre-inflation, pre-pandemic world is impossible. According to them, we have entered a global war economy. Countries are scrambling to shore up their military and economic security. They predict gold will rocket to $3,000 an ounce on unstoppable inflation.

In pursuit of that security, central banks are purchasing gold as global recession fears and international instability mount. They bought 400 tons of gold in the third quarter. The World Gold Council said this was the largest single quarter of demand ever. “What we have seen and expect to continue to see is that central banks continue to diversify their reserves and hedge against risk with gold,” said a World Gold Council representative.⁴

China bought 32 tons of gold in November. Analysts think China has been building its reserves throughout the year. China, along with many other non G-10 nations, are preparing for ‘deglobalization’. The global economy is heading toward dedollarization. Countries are acquiring gold to protect their economies as the new economic order takes shape. Central banks want the safe haven qualities of gold to diversify their foreign reserves.

Gold futures climbed on projected increased demand. Current prices lifted on a weakening US dollar and US Treasury yields. Weakness in the dollar tends to decrease the opportunity costs for investors considering dollar-priced gold as an option versus other havens. Meanwhile, lower bond yields can raise the prospects for gold against government bonds.

Central banks to CEOs are preparing for a recession and global instability. A key component of that preparation is moving assets into safe havens that thrive in bad conditions. Gold is a proven safe haven asset that can protect country, corporation and individual. Contact us today to learn how our Gold IRA can safeguard your financial future.

Notes:
1. https://www.cnbc.com/2022/12/06/recession-walmart-jpmorgan-gm-ceos-talk-about-possible-slowdown.html
2. https://www.cnbc.com/2022/12/06/recession-walmart-jpmorgan-gm-ceos-talk-about-possible-slowdown.html
3. https://www.marketwatch.com/story/gold-futures-eye-back-to-back-gains-11670427092
4. https://www.kitco.com/news/2022-12-07/China-buys-32-tonnes-of-gold-in-November-first-increase-in-reserves-since-2019.html