Pressure on Fed to Ease Is Good News for Gold PricePaul-Martin Foss
White House economics adviser Larry Kudlow caused some raised eyebrows last Friday with his call for the Fed to immediately cut its target federal funds rate by 50 basis points. According to Kudlow, the Fed never should have raised interest rates above 2%. Despite protestations that the economy is fundamentally healthy, the call for an immediate interest rate belies that view. Ultimately this call for lower interest rates comes from fear that the economy is weakening and on the verge of recession.
The fact that policymakers understand that and are already calling for rate cuts may be bearish for the overall economy but it’s bullish for gold. A weakening economy and falling stock markets always results in an increased demand for gold, as well as a rise in the price of gold. Remember that when stock markets lost more than 50% of their value from 2007 to 2009, the gold price increased 25% and then continued to gain for the next couple of years.
One of the reasons investors flock to gold when the economy turns south is because of the peace of mind that it offers. Gold is a source of stability at a time when the rest of the economy is in flux. Far from being the “barbarous relic” derided by its detractors, gold remains the single asset most able to maintain its value in the face of a weakening economy.
With so many negative economic events on the horizon, now is the time for investors to start investing in gold if they haven’t already. Standing on the sidelines while stocks plummet and gold spikes will only result in regret. Millions of investors felt that way after 2008, wishing that they had had the good sense to get into gold. Don’t let the same thing happen to you this time around. Invest in gold today and keep your assets safe and secure.