This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Always expect the Fed to mess up, $2,175 as the next target, and palladium during the Russia-Ukraine crisis.
Buy gold, says analyst, because the Fed can be expected to mess up
Keith McCullough, founder and CEO of Hedgeye Risk Management, says that the economy is heading towards something they label a “Quad 4,” a state of emergency warranting government intervention. A Quad 4 means disappointing growth and inflation, year after year. McCullough expects growth and inflation to slow, causing a period of major earnings losses in the stock market.
And that’s all due to the Fed’s “too little, too late” approach to inflation:
If you go back to June 2020 when we started making the call that inflation was going to accelerate, it wasn’t until 12 to 18 months later that the Fed realized it wasn’t transitory. They’re playing catch-up. The Fed always screws up. Their policy is too tight, too late.
To McCullough, it’s a matter of when the Federal Reserve will start pulling back on its hiking cycle, essentially throwing in the towel on its battle against inflation. Recessionary risk has already been priced into the markets, even though we’ve only seen a single quarter-point rate hike so far. If the Fed sticks to their plan of six or seven more rate increases, recession will become reality, but McCullough predicts an early end to the Fed’s efforts.
This dovish turn by the Fed, says McCullough, will signal an economic recovery. Before that happens, though, we’ll likely see more suffering…
Since a stock market crash happens every time the Fed tightens during a Quad 4, McCullough’s firm are forecasting a minimum 20% downturn in equities. How bad could it get? McCullough says:
The longer the Fed stays vigilant, tightening into a slowdown, the faster stock prices fall. You’re going to really deflate asset prices.
How much could asset prices “deflate,” from a historical standpoint? Considering that the Shiller PE ratio is still double its historical average, a 50% drop in the stock market wouldn’t be surprising.
So how is McCullough’s team managing investment risk in this environment? Gold and silver are the only investments McCullough is entirely bullish on. Along with utility funds, these are the only safe haven investments McCullough thinks are suitable to ride out the crash ahead.
Bank of America: Gold could hit $2,175 this year, silver $30
In a Tuesday report, Bank of America analysts said gold’s recent price movements are a bullish development. Bank of America analysts believe $2,175 is a reachable target. In a worse-case scenario, gold will hit $2,078 instead.
A run to either $2,078 or $2,175 should mean plenty of opportunity. Bank of America recommends buying gold at $1,940 or below for maximum benefit. The team is, in general, very bullish on gold as well as silver against traditional safe-haven Treasury bonds and other commodities:
Gold vs. copper and gold vs. silver look like they are forming bottoms in favor of gold outperforming this summer. They just need one break higher to confirm. Gold vs. bonds and silver vs. bonds are breaking out to new highs suggesting precious metals are preferred, instead of bonds.
And gold won’t be alone… BoA analysts set their year-end price target for silver at $30/oz, a 26% increase from today’s silver price.
Bank of America is just one of many financial institutions expecting gold to surge over the next few quarters. S&P’s analysts said gold “showed promise” in the short-to-medium-term, while Wells-Fargo’s year-end target for gold remains $2,000-$2,100.
Palladium: peaks and beyond
Palladium has been seeing a lot of volatility. Going to $3,442 on March 7, passing the previous $3,000 high in doing so, then a pullback. Then back to $2,400, then down, then to $2,500. To avoid feeling the burden as if having to time the market, long-term palladium investors should simply remember to keep a long-term view.
Like gold, palladium isn’t a “make a quick buck” investment. It, like other precious metals, is a long-term investment meant to shield one from both crises and wealth erosion. Its wide industrial use obviously gives it greater upside, however, and that upside has been coming to prominence recently.
What exactly is palladium for?
Palladium is a vital component of pollution control devices for cars and vans. Its use is on the rise as governments, especially the Chinese government, tighten regulations to combat car pollution. It is also used as an alloying agent, for jewelry-making and in dentistry. The metal is also used to make surgical instruments, electrical contacts, musical instruments (transverse flute) and watches.
The Organization of Petroleum Exporting Countries, or OPEC, says there is no replacing Russia as a supplier. Commerzbank strategist Daniel Pressman said:
Russia accounts for 38% of global palladium production. Since other regions cannot compensate for supply cuts, the market risks falling into a huge supply shortfall.
Palladium is, in many ways, doing what silver believers would have liked the second-most popular metal to. But the industrial element, for better or for worse, always adds one or more unexpected twists to the mix. Instead of waiting for lower-priced entry points, novice and returning palladium investors should rejoice that they are seeing just how crucial palladium has become in the modern world.
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
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Buy gold, says analyst, because the tungsten cores are not making any money just sitting there naked.
If you maintain an IRA, buying PM mining equities may make sense. But do not ever, not ever, not no way, not no how, put “physical gold and silver” into a non-Roth IRA account. And even the Roth is debatable.
Why? Please elaborate.
I didn’t know you could put physical precious metals into retirement accounts.
Svarga, research Hard Asset Alliance.
Specifically their IRA accounts, using dollar cost averaging.
Or, you could buy various forms of 4 different metals, for storage locally or internationally,
or take delivery. If buying for storage, there are fees, be advised.
You’re welcome.
By putting “physical” PMs in an IRA you are converting a potentially very private and non-taxable asset (assuming there is no sale, or at least no reported sale, of the asset) into a fully reportable and fully-taxable (at your top marginal rate) asset, when the required IRA distributions are ultimately made.
FWIW I do believe that having some assets in an IRA is fine, if only for the convenience of trading without having the hassle of tracking LT/ST capital gain/loss. Roth IRAs may be a very good deal, IF the government’s future tax policies leave their advantages intact.
I myself have never put physical PM in a retirement account, but there are two approaches: the easy way is to buy one of the exchange traded funds that are actually redeemable in metal (Sprott offers some, and there are also similar non-Sprott products); the hard way is to form an entity (I believe an LLC is the usual type), the shares of which are in turn held by an IRA custodian firm; this LLC in turn hires you, or perhaps a professional manager, and can do just about anything that any other LLC might do, such as hold assets outside the USA, or buy and hold physical assets such as PMs, or land, or houses. There are, of course, IRS rules that have to be carefully followed, and the continuing annual overhead of the rather specialized IRA custodian and the LLC itself.
FWIW I looked at doing this sort of thing years ago, and decided that it was just too complex and expensive for my level of assets. If you have 10 million or more in a retirement account it might be well worthwhile!
Nah, digital hopium will surely save us.
Historical macro timing on Gold (and Silver) is explained below…scroll…and understand…it will not only provide you with wealth insurance, inflation protection, and hyperinflation super protection from the Black Swans currently blocking the sun (don’t touch Gold if you don’t have wealth – buy Silver) both have a 5,000 year proven history.
AFTER you have all the common sense PREP/FOOD PRODUCTION/BARTER yada, yada, yada, secured…get the HELL OUT OF DIGITAL FIAT/PAPER and own some physical precious Metals.
I don’t give a shit if all you can afford is just 10 oz. of silver…DO IT!
https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
https://www.macrotrends.net/1470/historical-silver-prices-100-year-chart
Mark,
Who is going to allow gold/silver as a medium of exchange? Government?
Property covered/tools/seeds/food stocks/tools of freedom and food for tools of freedom covered,sure,consider some metals while learning new skills.
I see as always metals a insurance policy against inflation,things go really wrong those 200+ bic lighters you bought(right?!) worth more in a guarded traders market short term at least then silver/gold.
I own all of the above and am working hard on skills,more then I have so hopefully can cover more shortage/actually create a build.
I am a firm believer in gold/silver,just feel a lot more priorities first to cover,prepper cat agrees.
Is the reason that with interest rates on the climb, non-performing assets like gold are going to be unattractive, thus driving the price of gold downward, and the people he works for want to sell off their inventory as soon as possible?