Federal Reserve Punts as Gold Hits Record Highs

The Federal Reserve’s Federal Open Market Committee (FOMC) has just wrapped up its last meeting before Washington, DC clears out in August. The next meeting isn’t scheduled until mid-September. The July meeting is typically seen as indicative of the Fed’s policy response come fall, as trading will get underway in earnest post-Labor Day before the FOMC meets again.

Many analysts and observers had looked to today’s meeting for some guidance as to what the Fed intends to do in the fall with regard to monetary policy, but the FOMC’s statement was as tight-lipped as ever. The Committee decided to keep its target federal funds rate at 0 to ¼ percent, and stated that:

To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate.

That isn’t a terribly exciting decision, as it just carries on the same old policy that has been in place for a while. Although the Fed’s monetary policy remains super-loose in comparison to the past few years, the Fed has been slowing its rate of asset purchases over the past few weeks, not providing nearly as much liquidity as monetary policy doves would like.

Many were wondering how the Fed would “out-dove” the markets, if that is even possible. Since the Fed has telegraphed its monetary policy intentions, its future actions are already priced in to markets, thus today’s decision doesn’t really have much of an impact one way or the other. Of far more importance is the fact that the Fed extended the term of its credit facilities that were slated to expire at the end of September, extending those facilities to the end of the year instead. That’s an indicator that the Fed expects the economy to continue to weaken over the rest of the year, and plans to maintain high levels of liquidity to businesses, municipalities, and households.

Stock markets rose slightly after Chairman Powell’s press conference on the hope of more asset purchases, but gold maintained its levels too, with the yellow metal pushing to over $1,980 at one point in trading, and comfortably remaining near $1,970 at the time of writing. That is far higher than its previous all-time high set in 2011, and over $100 higher than just last week.

With second quarter GDP figures set to be published soon, and possibly showing a record contraction in economic activity, the US economy is nowhere close to being out of danger. And with millions of Americans still out of work, unemployment bonuses fading away, and the eviction moratorium ending, millions of Americans are about to experience severe financial difficulty.

Even those who are financially well off have to be wondering how they’re going to protect their wealth in a time of growing uncertainty. As gold pushes toward $2,000 an ounce, the answer should be clear: gold will be the way forward for those looking to safeguard their assets.

We’ve seen this scenario before, from 2008 to 2011 when the economy was reeling from the Great Recession, business activity was flat, and investors didn’t know where to put their money. Stock markets struggled to regain their previous levels, but gold nearly tripled in value, rewarding those investors who trusted in gold’s ability to protect wealth.

If you have retirement assets in tax-advantaged accounts such as a 401(k), 403(b), TSP, or similar accounts, you can protect your assets by rolling them over to a gold IRA. That allows you to invest in physical gold coins or bars while still enjoying the same tax-advantaged status as a conventional IRA retirement account. Better yet, that 401(k) rollover normally occurs without tax consequences, meaning you don’t have to pay taxes or penalties.

With gold now hitting record high prices and set to push even higher in the coming months, what are you waiting for? Contact Goldco today to find out how you can put gold to working in protecting your retirement assets.