Market News

A Trade War’s Positive Impact on Gold

The recent tariffs placed on China by the US signal a potential trade war, and that pushes investors to buy gold. Historically, gold is shown as a go-to safe haven when local and international events cause economic uncertainty.

In fact, after the President’s recent tariff increase of $200b on Chinese imports, exchange-traded gold contracts rose. Investors are taking an aggressive approach while the market fluctuates, and gold prices remain acceptable.

The 2019 market has indicated heightened optimism, but a possible trade war raises a red flag. While a viable trade agreement with China would lead to more fair and just process for the US, investors and politicians alike tend to respond with angst as these dealings can lead to economic woes or a global growth slowdown.

When To Invest in Gold

A crisis such as a trade war actually has a positive impact on gold. Even so, that positive impact rapidly changes as more investors get on board with this safe haven metal and cause prices to jump.

An impending slowdown is often the best time to diversify your portfolio and hedge with gold. A dip in the stock market drives investors to take action even though the standard rule says, “don’t sell during downturns,” according to Suze Orman and many other investment strategists. A safe investment strategy during a downturn is simply to diversify, and gold is currently an appealing option.

What Countries Are Holding Gold?

Whether or not the US can avoid a trade war with China, analysts predict increasing gold prices. Bear in mind, China holds one of the largest supplies of gold. The site states, “China has 1,885.5 tonnes (metric tons) of gold in its reserves. It is also the world’s biggest gold producer, ahead of Australia and Russia, and the local demand for gold has been boosted by the burgeoning wealth of its growing middle class.”

The US has the most gold among all of the countries. “The United States of America is the country with the most gold in the world. It has 8,133.5 tonnes (metric tons) of gold bullion. That’s nearly as much as Germany, the IMF and Italy combined,” also according to Italy, France, Russia and Switzerland also have gold in the thousands of metric tons.

A Lower Risk Investment—Gold

Since gold is said to remain strong even in the midst of a trade war, US investors must stay focused on the US national economy. While the US economy could slow, the position of worldwide countries is generally slower.

Should we see slower global growth throughout the year, regardless of a suitable trade agreement between the US and China, equities are projected to decline. This would make lower risk investments such as gold more desirable for investors.

The increase in central bank gold purchases is another key indication that gold is a hot commodity. They are purchasing precious metals at a faster rate than ever over the last 50 years. Not only that, gold volumes have increased more in the last year than since 1971, when the gold standard was dissolved.

As the central banks purchase more and more gold, they are driving smaller investors to diversify their financial portfolios with gold—a desirable lower risk investment to align with economical concerns.

Gold Purchases a Continuing Trend for Emerging Markets

International government banks will purchase precious metals no matter what the price, and they are increasing their supplies in emerging market economies to protect their own countries. With trade agreements in jeopardy, what better time for banks to buy gold? But this should concern small and large US investors.

As emerging markets snatch up gold, it is a critical time for the US to accumulate gold and individuals investors to diversify and hedge with gold. Central bank purchases are driving US investors, and the outlook for gold continues to spike.

Gold As Financial Insurance

Gold is often seen as a financial insurance to combat inflation or a potential disaster such as a trade war. author and savvy investor, Drew Housman, wrote an article entitled, “The best personal investment decision I ever made was investing in gold — here’s why.” In his article, he makes several common sense claims about gold:

  • Gold retains its value
  • No other currency can match the staying power of gold
  • Gold performs well under many economic conditions
  • Gold buys a balanced portfolio

Housman said that he put 20% of his assets in gold after he made a poor decision in 2011 to pull out of stock market. He lost money. He then sought a more stable portfolio that included gold in order to handle a future volatile market situation. He believes the purchasing power of gold to be consistent throughout history.

What better financial insurance than gold—and now is the time to consider a gold-backed IRA or financial portfolio adjustment to include a percentage of gold. If a trade war breaks out, this safety net can secure your assets to withstand a downturn.

Financial Protection In The Case of a Crisis

Since the 2008 financial crisis, banks have been preparing for the financial risks of yet another crisis. They have fixed interest rates, issued credit, produced money, and supplied borrowers. While these actions may seem to be to the advantage of the people, they in fact trigger a false sense of security. The Dodd-Frank Wall Street Reform and Consumer Protection whereby the bank is now protected by your funds is a good example (see article).

As we prepare for any financial crisis including the results of an unwanted trade war, we as small or large investors must protect our assets. Financial protection begins with adding gold to your investment portfolio. Investing in this beautiful metal has two key advantages:

  • Purchasing gold to include in your investment portfolio gives you an asset that may not be degraded by the monetary policies of the central banks.
  • A gold investment does not involve the same risks as a paper currency deposit, especially in the case of an economical downturn.

Right now, gold is performing well. It is relatively inexpensive, resalable, and a reliable hedge against market fluctuations. Make gold a part of your investment portfolio today, and protect your future for tomorrow. While we do not want a trade war, gold is an asset that stands up against the worst crises.

Market News

Status of the Gold Standard in America

You remember the Gold Standard. Investopedia defines it like this: “The gold standard is a monetary system where a country’s currency or paper money has a value directly linked to gold.” The gold standard was popular as early as 1871 up until 1931 in Britain and 1933 in the US (especially in the early years of the 10-year Great Depression).

While no government is currently relying on the gold standard today and hasn’t since 1971, it is possible we may have a President that will place our country back on this monetary system.

In its day, countries using the gold standard converted their paper money into certain amounts of gold. A fixed price was set for buying and selling gold. Fiat money later replaced the gold standard as the accepted form of payment.

Investopedia defines the fiat system as “…government-issued currency that is not backed by a physical commodity, such as gold or silver.” This has been a reliable paper system for many years; however, this monetary system has its disadvantages.

Fiat money allows government-based central banks more control of the economy in the amount of currency that is printed. When too much money is printed, the result is hyperinflation. It is money truly regulated by the government.

When people lose faith in our nation’s monetary system, money fails to hold value. The difference with gold is that it retains intrinsic value for many applications, from jewelry to electronics and high-tech devices.

Gold’s Impact on Currencies

Gold has a continuing impact on the value of global currencies. In earlier periods in history, gold was used to back fiat currencies. Even today, it is often used as a hedge against inflation.

Gold prices also affect countries involve in gold import and export. Exporters of gold may experience an increase in currency values as gold prices increase. A trade surplus may result or on the other hand; the opposite scenario may result in a trade deficit.

Even the purchase of gold can devalue the currency used to make the purchase, largely because of supply and demand. As well, gold prices may mistakenly be used to measure the value of a currency.

With the impact gold has on world currencies, it is today a valuable substitute for paper currencies in hedging against inflation. Few other tangible worldwide assets have prevailed. Silver is a viable alternative, but today, the value of gold is higher and more popular among investors and central banks.

How the Gold Standard Would Benefit the Country

There is plenty of buzzes nationally and internationally about modifying our monetary system, and much of that discussion revolves around gold.

US politicians are discussing the benefits in bringing back the gold standard, according to Investing News. While there are certainly pros and cons, there is government support for this type of monetary system. The gold standard return in the US would cause prices to skyrocket to as much as $10k per ounce.

The return of the Gold Standard in America could show many positive benefits given the state of the country. With a climbing, national debt, tension for fair-trading, and increasing threats to our safety, the gold standard has the potential to ease some of these concerns. The gold standard could:

  • Shrink the trade deficit with other countries
  • Help maintain price stability (as shown in prior years when the gold standard was in place)
  • Build reserve assets in an attractive, tangible product
  • Build solidity for alternative gold-backed IRAs
  • Value currency directly with gold for self-regulating, stable economic results

If the US could hold gold in reserve to match outstanding debt, it would improve credit rapport between countries. The printing of paper money could be managed in terms of inflation. Government spending and debt could be minimized.

The Right Time for The Gold Standard

America, as the 2nd largest country for gold mining, is in the perfect position to bring back the gold standard. It was accomplished and successful for centuries in most advanced nations until President Roosevelt made gold coins and bars illegal to private owners.

Nixon disallowed foreign government gold for dollar exchange in 1971 primarily because of the rapid depletion of US gold reserves and the Emergency Banking Act of 1933.

Gold ownership is legal again! Private investors, as well as central banks, have the option of using gold to hedge against inflation and uncertainties! Not only that, history reveals that holding a percentage of gold as part of your financial portfolio is a responsible choice for lowering volatility.

In our current fiat system, the US dollar fluctuates without gold against worldwide country currencies. Imagine the possibilities if the gold standard was returned! This is the perfect market for diversifying. If the gold standard were to become a sustainable monetary system once again, now would be the exact time to invest in gold while supplies and prices are manageable.

Consider an investment in gold to prepare for the exact time when the President could renew the Gold Standard as an active monetary system. Whether or not it happens, it’s time to be prepared for the unexpected.

The opportunity to acquire precious metals in an individual retirement account (IRA) is in front of you. Don’t miss it. Contact Reagan Gold Group today and make your investment while gold prices are still reasonable. If you wait, it might be too late.