Last week, Federal Reserve Chairman Jerome Powell said the Fed isn’t expecting to raise interest rates for the rest of the year.
But regular readers shouldn’t be surprised… I predicted that would be the case on December 31, 2018. Here’s what I wrote then:
I don’t think Powell will announce any rate hikes in 2019. The market is too wobbly right now, and additional rate hikes would probably knock it down even more.
And with my prediction coming to pass on March 20, it means the current benchmark rate will remain between 2.25% and 2.5%.
Fed policymakers cited concerns of a global economic slowdown—including inflation forecasts and increased U.S. unemployment—as rationale for its dovishness.
We’ll let the mainstream media debate the Fed’s decisions. But in the meantime, I’ll revisit the other prediction I made on December 31—and show why you should prepare for this money-making opportunity today…
Major Stimulus for Gold
“The environment is right for a gold rally.”
That’s the second prediction I made last December. If you don’t recall, I said gold would catch a bid from low interest rates. Since then, the yellow metal is up $30 per ounce—a 2.5% increase. It’s a big move for the relatively stable gold market.
But I think this run is just getting started.
Interest rates are still historically low, and that alone is bullish for gold… The “real” interest rate—which takes inflation into account—is currently 0.3% and looks to be heading below zero.
And when real rates go negative, your savings lose value. So savers will turn to assets that preserve wealth, like gold. (After all, why pay the bank to hold your money?)
The last time real rates fell below 0% was in 2016. As you can see in the chart below, gold surged 21% over the next 11 months…
And right now, the futures markets put the chances of the Fed actually cutting interest rates this year at 60%. If the Fed does so, it would push real rates into negative territory, just like in 2016. (Remember, real rates account for inflation.)
This would lead to an acceleration in gold’s price. So this setup is looking like a profitable opportunity.
Plus, the timing couldn’t be better.
Friday’s “Crisis” Deadline
You see, the current low-interest-rate environment won’t be the only reason for gold’s next move up…
As I mentioned, the Fed expressed fears of a global recession as the basis for its dovish stance. And a potential trigger for that recession could be Brexit—the UK’s pending (and increasingly ugly) divorce from the European Union.
At writing, the separation will occur on Friday (unless both sides agree to an eleventh-hour extension). Several proposals for a clean break have already failed, leading to a great deal of uncertainty in the global markets.
And Crisis Investing chief analyst Nick Giambruno has been following the ongoing Brexit saga. He says it could spark a global recession.
As the globetrotting protégé of longtime PBRG friend and legendary speculator Doug Casey, Nick writes about value investing in crisis markets… the global cannabis market… international banking… and second passports, among other topics. So he’s our trusted source when it comes to geopolitics.
Regardless of Friday’s outcome, Nick says the contentious Brexit talks will rattle foreign markets until a final agreement is reached—which will also push investors into gold.
Here’s what he wrote in the March 26 issue of Crisis Investing:
Leading up to the Brexit referendum, gold was range-bound. After the results came in, it soared.
That’s because gold is the original “crisis currency.” It’s what you want to own during a panic in financial assets.
In a crisis, people want the assurance of gold. There’s zero default risk when you own gold bars or gold coins.
Simply put, gold is the ultimate form of wealth insurance. For thousands of years, it’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.
The chart below shows how gold performed during the previous 2016 Brexit referendum. The day after the vote, gold jumped by 5%. And a little over a week later, its price was over 8% higher than before the vote.
So the Fed’s low interest rates and the uncertainty over Brexit are dual tailwinds that’ll push gold prices higher. That’s why you should prepare to profit from this opportunity today.
If you want to play this trend, Nick says to consider buying physical gold. And if you’re a speculator, you can consider adding some exposure to gold mining stocks, too.
Analyst, The Palm Beach Daily
P.S. Last night, Nick Giambruno hosted the world premiere of Totally Incorrect: LIVE, starring Doug Casey. Over 20,000 independent-minded folks signed up to watch the event. And it was intense—Doug didn’t hold back. (Miraculously, we haven’t gotten many complaints about the controversial predictions Doug put forth.)
During the webcast, Doug also revealed his five most urgent predictions for 2019 and beyond. Plus, he shared details about five different speculations that could pay out 1,000%—or more—over the next year.
If you missed last night’s event, the good news is you can watch a replay right here.
Some critical responses from readers today…
From Jack W.: Nick, I’d appreciate if you guys would keep your political opinions out of your newsletters. Calling people you disagree with stupid is stupid in itself. You don’t cite any actual evidence that socialism is “stupid,” and in fact, there’s evidence to the contrary.
Socialism is a continuum—not an absolute. For example, should we abolish Social Security? Medicare? Infrastructure building?
There’s a happy medium where social programs actually benefit everyone—including investors—and where social programs go too far. My advice is that you stick to the facts and make recommendations like we pay you to do.
From Faye W.: We should never put artificial intelligence (AI) over humanity. If AI becomes more important than people, we’ll lose our own identities and simply become machines made out of flesh. God forbid!
Are you a supporter of social programs? An opponent of artificial intelligence? We want to hear from you, too. Send us your comments right here…
Over 20,000 people signed up to hear Doug’s five big predictions (which are too controversial to print here) that could deliver 1,000%-plus gains over the next year.
If you missed the world premiere, no worries. You can watch the replay right here…