Gold Rises While Economic Recovery Reverses

The U.S. stock market has seen some relief and recovery over the last few months as businesses have reopened, but are things about to dip again? Some analysts are noticing a recovery reversal all while experts warn that millions of Americans are about to experience the worst part of the pandemic financially, which would result in blows to just about every market except gold and silver.

Last week CBS News reported that 43 million Americans are now at risk of eviction. Since late March, the federal government was protecting renters in federally backed housing with an eviction moratorium, effectively covering about 12 million households or 30% of all renters. On July 24, the moratorium ended, leaving all renters at the mercy of state laws and their landlords. As I currently type this, there is a protest against evictions in Minneapolis... How timely.

If supplemental governmental aid was continuing for these families, the end of this moratorium would arguably pose less of a problem for these families, if one at all. But on July 31 the CARES act’s $600/week in federal unemployment aid ended. This means tens of millions of Americans who have not yet been allowed to return to their jobs or whose jobs no longer exist, may become homeless.

It doesn’t take a market analyst to guess what this many jobless, homeless, penniless Americans would do to the economy. Although both Republicans and Democrats are working to determine whether or how to extend more financial aid to Americans, they have not yet reached a deal and there is no guarantee that they will. Our economy, along with many Americans’ portfolios, retirement accounts and perhaps bank accounts may have to brace for impact.

This would also mean that silver and gold would need to brace for launch. Silver and gold have performed just as expected throughout this pandemic – rising steadily with a few jumps along the way. Since they behave inversely to the markets and are widely regarded as safe-have assets (cash), they generally have no reason not to continue to climb. But if the economy takes a sharp turn down, silver and gold are propelled upward with proportionate momentum.

Portfolios that are properly positioned in these precious metals are already braced and prepared for both crash and launch. As witnessed in the Great Recession, these extreme downturns are really just wealth transfers from one area to another. The secret of those who financially survived the Great Recession is that with gold and silver they are “in” on the transfer, seeing it occur from one end of their portfolio to the other end of their portfolio, rather than seeing the wealth get transferred from their portfolio to who-knows-where.

If you’d like to better understand the reliability of silver and gold as wealth insurance for your or your clients’ portfolios, please contact our office today. Our team has years of experience helping protect clients’ wealth amid many challenging times.