Bank of America Merrill Lynch’s research team is calling for gold prices to surge to over $1,300/oz in 2019.
The U.S. budget deficit is widening
Our deficit is slated to hit $1 trillion in 2020. After sizable deficits in 2018 and 2019, the U.S.A. will be ever closer to default.
Trade wars could damage the U.S. economy
A tariff-driven trade war could damage our nation’s economy quickly, in ways that could be painful to unravel later.
Francisco Blanch, head of global commodities and derivatives research for the investment bank, said “we’re pretty constructive longer term on gold.”
Primarily this is because of the bank’s worries over the future of the U.S. economy. All of the recent tax changes we’ve experienced have clearly lowered the flow of revenue to a government that is spending more every year.
Blanch says “in the long run, it basically begs the question, can this go on for much longer? Can the U.S. borrow its way out of the next downturn and at what cost?”
Ray Dalio, famed hedge fund investor, has recently been saying that the near future will bring an environment where the U.S. is forced to print money to fund a deficit gone out of control. The resulting inflation would be crippling to America’s retirees.
The U.S. Treasury has already lifted note and bond sales… to levels not seen since the last recession. The borrowing will only get more intense ahead – especially if the economy falters.
It doesn’t take a rocket scientist to see why considering alternatives to traditional markets just makes sense. Now more than ever.
According to MarketWatch, “gold has served as a hedge against crises like 2008, when it surged 17% over a six-month stretch that saw the S&P nearly get cut in half. With no shortage of bearish predictions, and the prospect of a troubling inflationary period ahead, that kind of protection may come in handy.”
So it pays to be vigilant and stay protected.
Even though the U.S.A. seems to be performing relatively well at the moment, Bank of America’s Blanch says “in the long run, a huge U.S. government budget deficit is pretty positive for gold,” he said.
Goldman Sachs is in agreement. They expect gold prices to hit $1,325 in the next year.
TRADE WARS THREATEN U.S. ECONOMY
This week, the U.S. slapped new duties on $200 billion in goods coming from China. This was followed with threats to impose more tariffs on almost $300 billion more.
In response, China has not showed any signs of backing down from their side. Clearly, this situation could get far worse before it gets better.
“Eventually the trade wars are going to come back to bite the U.S.,” say Blanch at Bank of America Merrill Lynch. “Eventually it’s going to happen. Maybe the Fed acknowledges it sooner, which is what people are going to be looking for in terms of getting more bullish on gold.”
Market timing is not our business, but long term protection and diversification for your portfolio is.
If you agree with Francisco Blanch that “trade wars are not good for the economy,” then it might be time to consider safe haven assets like gold in your home safe or Gold IRA.
CENTRAL BANKS BET BIG ON GOLD
Gold doesn’t just provide safe haven protection to individuals and their portfolios.
Gold and silver continue to provide powerful stability to the global financial system. They are key components of central banks’ foreign exchange reserves.
The International Monetary Fund (IMF) recently reported that central banks now collectively own the equivalent of about $1.36 trillion in gold reserves. This is around 10% of global FX reserves!
This is why central banks are such an important part of the demand equation for the gold market. Central banks, in fact, account for about 10% of ongoing demand.
Looking ahead, the World Gold Council reports that central bank demand is likely to remain strong. The driver is their ever-present need for diversification. The global economic transition to what the WGC calls “a multipolar currency reserves system” over the coming years will also mean more central bank buying.
It is any surprise that investment banks, central banks and hedge fund managers are looking at gold as a possible beneficiary at a time when it isn’t inconceivable that inflation could strike, markets could crash and the U.S. dollar could crater?
If you haven’t taken a serious look at gold and silver, it could be an ideal time today. Education is the first step in finding ways of protecting against what might come next.
ARE YOU CONSIDERING GOLD FOR YOUR PORTFOLIO?
A question we get a lot is: is it the right time to consider gold?
To be honest, buying gold is the kind of long term decision that can span generations. It is about preserving a family legacy that would otherwise be dangerously exposed. It is about balancing out the inevitable market crashes and downturns that hit traditional markets every so often, just as reliably as the sun rises and sets.
So, in that sense, when it comes to adding safe haven protection and market diversification to your portfolio, it is always a great time to consider gold.
That said, some analysts like Goldman, Bank of America and others are also pointing to higher prices ahead.
RBC Capital Markets says “Overall, we think that current prices represent a solid entry point given our baseline view that price risk appears more bountiful on the upside,” the analysts said.
Regardless of your specific reason for considering gold, we welcome your interest and invite your questions.
Is there something you’d like to know about gold and silver? About setting up a Gold IRA?
The process is easy, and we will patiently answer every question you might have.