Editor’s Note: The article below generated from corporate media reports delivers a strong pitch for physical precious metals. Whenever we post such articles, we get comments that we’re “fearmongering” about the economy for the sake of promoting gold sales.
It is not for the sake of fearmongering that we promote these stories. It’s because we have legitimate concerns about the economy, both today and more importantly into the future. We are strong proponents of physical bullion, whether to keep in your safe or to secure your retirement accounts. With that said, here’s the article explaining the current state of affairs by Discern Reporter. Feel free to reach out to our precious metals partner, Ira Bershatsky…
Investor demand for safe-haven assets amid market volatility and geopolitical instability in the Middle East has led to an increase in both gold and the U.S. dollar. The December Gold Futures are currently consolidating recent gains near the significant $2000 mark.
Concerns over escalating war fears, government dysfunction, and rising bond yields have caused the S&P 500 to lose key support at 4200 mid-week, setting the stage for a potentially turbulent Fed-week.
The rising bond yields have further fueled interest in gold as traders and investors grow worried about U.S. fiscal policy and the potential impact of increasing yields on the economy.
Investors are particularly concerned about the growing amount of U.S. debt, which now stands at over $33.6 trillion and continues to rise rapidly. The surge in bond yields has also resulted in a rise in mortgage rates, putting pressure on home buyers looking to remortgage.
While the Federal Reserve is likely to maintain its current inflation-fighting approach during its upcoming meeting, the cost of borrowing for home buyers has increased. This cautious approach from businesses and banks, coupled with higher borrowing costs and gasoline prices, has put restraints on economic growth.
Despite better-than-expected economic indicators such as home sales, advanced Q3 GDP reading, durable goods, and weekly jobless claims, there are concerns about the sustainability of consumer spending due to stagnant incomes. Businesses are also approaching the market cautiously due to higher borrowing costs, and banks are becoming more reluctant to lend.
The current quarter’s performance is crucial, as there are already signs of a potential slowdown, including cautious corporate commentary and a decline in bank lending.
The Leading Economic Indicator (LEI) is also showing signs of concern, with its current decline and narrowing interest rate spreads suggesting that a recession may be approaching.
As the price of gold approaches an expected breakout to all-time highs above $2100, there has been increased interest from long-term investors and Western institutions in gold-backed exchange-traded products. The Gold/S&P ratio has also been rising, indicating that gold is outperforming the stock market, particularly amid intensifying Middle East conflicts.
Given the current state of the U.S. economy, including a growing national debt, a dysfunctional government, ongoing wars, and credit rating agencies scrutinizing major banks, Western investors may consider diversifying their investments by allocating some profits from the stock market to gold.
The expectation is that mining companies will outperform the stock market once the GOLD/S&P500 ratio establishes support at the 0.50 level and gold surpasses the $2100 mark. Junior mining companies are also expected to outperform both the stock market and larger mining companies.
In anticipation of these potential gains, the Junior Miner Junky (JMJ) newsletter has compiled a selection of quality junior mining companies with significant upside potential into 2025-26.