Skip to content

What Gold Will Do When They Cut Rates

For many years, barometers have been used in forecasting weather outcomes and patterns. A barometer that has a high reading (meaning high pressure) and is stable, indicates good weather. A barometer that is falling indicates that a low-pressure system is moving in, and you can expect the weather to become less favorable.

Similarly, we can use a barometer to forecast the U.S. and global economies by watching and evaluating pressure and stability factors. If rates continue to rise, that signals our economy is “stable” and indicates “good weather.” Yet, unfortunately, we haven’t raised rates since December of 2018, meaning our economy is neutral and capable of going either way.

On June 4, Reuters reported on Federal Reserve Board Chairman Jerome Powell’s remarks following the closed two-day Federal Open Market Committee meeting:

“There will be a next time,” Powell said in opening a two-day conference devoted to a discussion of whether to try to jolt inflation and interest rates higher, or plan for more massive rounds of asset purchases.

Interest rates so close to zero “has become the preeminent monetary policy challenge of our time,” Powell said. “Perhaps it is time to retire the term ‘unconventional’ when referring to tools that were used in the crisis. We know that tools like these are likely to be needed in some form in the future.”

Powell spent most of 2018 touting how great our U.S. economy was and the need to normalize (raise) rates once again. All it took was November and December’s market downturn for him to act and speak in direct contradiction to his own statements.

So where does this leave us as advisors for our clients? The barometer is falling and the market is already pricing in rate cuts coming this year, so maybe it’s time to nudge your clients. Since gold and silver historically skyrocket during economic downturns and when the barometer is lower (rate cuts), this is an opportunity to remind your client base that you have the ability to offer gold and silver that they can physically possess or have inside their IRA.

When the economy turns south, don’t wait for your clients to ask you about gold and silver. At that point the gold and silver commercials, radio ads and newspaper propaganda will have already been misinforming your clients for months. Take the first step in their best interest and yours, and make sure they know you have a licensed, fiduciary and wholesale connection.

In the meantime, we will continue to monitor the “weather” by keeping you informed and up-to-date.