Buy Gold To Hedge Against Ballooning Inflation.
World Events Will Push Gold Prices Above $2000. Trump’s ‘America First’ Policy Could Spark Gold Bull Market.
Financial experts are predicting a huge upturn in gold prices over the next 18-months. The forecasts being floated range from $2200 to over $5000 – a potential 300% increase!
Whilst mainstream media is coating over the cracks with reports of strong momentum in the US economy, events around the globe threaten to spoil the comeback of the greenback.
So why is the cost of gold about to sky rocket?
An impending trade war between the United States and China will be the catalyst for the first gold bull market in three years. The world’s two largest economies have be throwing trade blows with each other since April. Tariffs on imports and exports between the two nations is already starting to inch inflation upwards. Core industries in the US will feel the effects of a rise in tax duties and then will spill out further afield.
With political tensions between the two countries escalating, there is a potential for a full-blown trade war which will go beyond taxes. Entire supply chains could be disrupted as investment is targeted.
A US-CHINA TRADE WAR WILL SPUR INFLATION THAT IS ALREADY SHOWING SIGNS OF RISING.
DECLINE OF THE DOLLAR
Since Trump announced increased tariffs on Chinese exports, the dollar has fallen against a raft of currencies. By taking the America First route, the Trump administration is placing premium risks on US assets. This is negative for growth. When former Presidents George W. Bush and Bill Clinton introduced tariffs, the dollar declined by 15%.
Encouraging US manufacturing will have minimal effect. US firms still need supplies from China – the world’s leading steel manufacturer. Firms that rely on metals such as automotive, engineering and construction are already edging up prices.
Further import-export restrictions will prompt a flight from capital flows needed to finance the ballooning US debt. The US Treasury borrows 60% of its funding to trim deficits from foreign
partners – including China and Europe. If Trump goes ahead with a trade war, the EU will increase tariffs on US exports.
Therefore the biggest risk to the dollar is negative sentiment towards the short-term advantages of the currency. In the past, a lack of confidence in the US dollar has coincided with a growth in gold purchases. The media can paint a red carpet under the US economy all they want, but Uncle Sam’s allies could sweep it from underneath the Treasury’s feet at any moment.
DEBT AND INFLATION IS OUT OF CONTROL. INVESTORS IN THE USAND AROUND THE GLOBE NEED TO START PLANNING LONG-TERM!
GOLD HEDGES AGAINST INFLATION
In the decade following the banking crisis, the Fed has encouraged spending in an attempt to fuel the US economy. As a result of liberal money printing and low interest rates, US deficits has bloated to over $15.3 trillion. The biggest beneficiaries of low bank rates were global companies such as Apple and Microsoft who were able to lend more to expand their global reach.
With a rise in tariffs on import and exports, international companies will increase their prices and put the additional spend back on consumers. US retailers that import goods from China, such as Walmart, will also squeeze prices as living standards go up. The domino effect will not only be felt in the US, but globally.
Historically, gold has been used to hedge against inflation. Economic charts show the yellow metal is the most reliable investment commodity for pension portfolios because of a strong increase against inflation. As inflation rises, the value of the dollar declines over time. The value of gold, on the other hand, increases over time.
Geo-political instability is set to increase demand for physical gold. The rise in oil prices and increase on tax duties will be felt all over the world. Banks and governments are already making plans to ride the wave – and gold is set for a central role.
- Federal Reserve due to increase interest rates three or four times by end of year
- Italy’s government announced promise to increase spending and challenge EU fiscal rules
- Eurozone inflation jumped on higher energy costs
- Russia produced 15.67 tonnes of gold in January
- Sales in American Eagle gold coins up by 433% in May
- Downward corrections in equities expected in 2018
- Incomes rising in emerging nations – consumers buying gold
- Gold is recognized as alternative currency marketer
There is no way to escape inflation, but gold does offer a solution to hedge against inflation over the long-term. For pension savers, the only economic solution is to buy gold bullion.
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