As Economy Falters, U.S. Money Reserve Explains Gold’s Rise

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U.S. Money Reserve Gold on the rise

The economy is starting to cool in the face of a number of factors across both financial and government sectors. Though these changes have been broadly covered in many places, some of the specifics are still vastly under-appreciated, and a deeper understanding of the issues can help those interested in financial markets make more informed decisions. One choice available to buyers today is whether to capitalize on the opportunity presented by gold, which is currently ascending to a six-and-a-half-month high. The precious metals distributor U.S. Money Reserve has crafted educational information that may be of interest to those seeking to learn more about the economy and gold’s performance.

Current State of the Economy

Before examining the ascent of gold and other precious metals, let’s first take a look at the economy and some of the indicators that economists are using to forecast its continued downturn. These forecasts, in the context of financial markets, are decidedly lukewarm. With stocks having their worst year since 2008 and their worst December since 1931, analysts are justifiably worried that these trends may continue. If they do, the coming year may prove to be even worse for stocks and many other financial assets, a prospect that could seriously undermine the portfolios of many individual buyers.

Beyond financial markets, there are also widespread concerns for the economy at large. Though the economy recently showed some impressive gains, with 2018 seemingly marking the largest GDP growth in a decade, it is also apparent that 2019 could be much less impressive. One of the indicators of this possibility is an economic tool used to measure the strength of the manufacturing sector; the tool is known as the Richmond Fed Manufacturing Reading. This survey relies on respondents to report how they see economic activity trending based on their observations. That survey showed a massive drop from November to December. In fact, the reported decrease was the largest decline from one month to the next in the history of the survey.

Gold Performance

As other assets in financial markets experience the decline outlined above and concerns about the state of the economy continue to mount, there is one asset that U.S. Money Reserve notes is doing quite well—gold. As broader financial markets experienced their December downturn, gold underwent a marked increase in market value, reporting an almost five-point rise versus the S&P 500’s nine-point drop. This rise is reflective of the broader performance of the precious metal in recent years, with gold outperforming the S&P 500 over the course of the entire century to date with a rise of 345 percent compared to a mere 70 percent for the S&P 500.

The enviable performance of gold over multiple time periods can in part be traced to the metal’s historic ability to enjoy an inverse correlation with the rest of the market when the market is in decline. The stability of the precious metal during times when the market is doing poorly highlights its position as a safe haven for wealth during uncertain times. One widely held sentiment about the asset is that it can be used as a store of market value in a manner that is not typical of other assets such as stocks.

Related Economic Bumps

Another factor that is contributing to the current ascent of gold valuation is the weakening of the dollar compared to other currencies. When the dollar weakens, making other currencies stronger by comparison, foreign buyers are essentially able to purchase precious metals such as gold at a cheaper rate than otherwise possible. An analyst from Julius Baer, Carsten Menke, recently commented on this issue, noting that “the performance of gold in other currencies than the U.S. dollar is driven by the performance of these currencies versus the dollar.” He went on to highlight that the gold market is in a longer-term recovery “driven by a combination of normalization of market sentiment, a weakening U.S. dollar, and returning investment demand.”

In addition to the metal itself, other aspects of financial markets related to gold are seeing an increase in valuation. One area that is experiencing this in a quite pronounced way is the precious metals mining sector. This is measured by the FTSE Gold Mines Index. That index saw an increase of almost 16 percent in the three months preceding the start of 2019. Some of the biggest increases were seen by Kirkland Lake Gold, Nevsun Resources, and SSR Mining.

Long-Term Outlook

Encouraged by the short-term gains that gold has experienced, many analysts are staying bullish on gold when looking toward the future. With current valuations nearing the key $1,300 per ounce mark, some have even expressed cautious optimism that the previous high of around $1,380 could be within reach. This could be dependent on how the dollar performs moving forward and whether or not stock market yields continue to prove underwhelming. If those trends continue, many feel that gold could be one of the safer havens for wealth moving forward (https://uk.reuters.com/article/global-precious/precious-gold-rises-to-highest-since-mid-2018-on-global-growth-woes-idUKL3N1Z32ZL).

While the cooling economy and financial markets have provoked plenty of concern among buyers and economists alike, many experts still believe that there are opportunities to protect wealth and even grow it in the foreseeable future. As discussed above, one of the chief targets for this type of talk is gold—and the way in which it can continue to serve in its historic role as a safe haven to protect against the volatility of uncertain markets. U.S. Money Reserve has outlined the information above in the hope that it can help inform those who are interested in the possible outcomes of current market movements with respect to both stocks and precious metals. Those who feel incited by current events to take a look at how they protect their wealth may be interested in further exploring the possibilities for the purchase of gold and other precious metals.

Company Overview

U.S. Money Reserve is a leading distributor of gold and other precious metals. As the only gold company headed by a former director of the U.S. Mint, Philip N. Diehl, the company is uniquely qualified to educate their customers about wealth management and personal financial freedom. Known for an enduring commitment to customer service that includes some of the fastest response times in the industry, the company has also been highlighted for the expertise of the account executives on staff. These reasons and more have earned the company a coveted AAA rating from the Business Consumer Alliance.

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