Market Participants Anticipate Fed's Decision
Market participants, including both investors and traders, have their attention keenly set on the upcoming Federal Open Market Committee (FOMC) meeting, slated for Dec. 13, 2023. There is widespread speculation about whether Fed Chair Jerome Powell will continue to uphold the current elevated benchmark interest rate. Concurrently, Jim Grant, renowned for his four-decade-long work on Grant’s Interest Rate Observer, holds the conviction that interest rates will stay at a "higher for much, much, much, much longer" level.
The Current State of Interest Rates
Presently, the federal funds rate stands between 5.25% and 5.50%, reaching its highest point in 22 years. This benchmark rate, crucial for banks and other financial institutions for inter-lending, serves as a pivotal mechanism for central bank officials in steering U.S. monetary policy. This week, the investment community is eagerly anticipating the Federal Open Market Committee's (FOMC) announcement, as well as Fed Chair Jerome Powell's press remarks after the meeting.
Speculation on Rate Hike
Current market sentiment does not foresee a rate increase by the Fed in the imminent meeting. As per CME’s Fedwatch Tool, the likelihood of a rate hike stands at a mere 2.9%. Conversely, the odds favor the rate remaining unchanged at 97.1% as of Dec. 10, 2023. Additionally, a significant number of market observers predict that the U.S. central bank will have to reduce rates soon. Wall Street Journal journalist Justin Lahart, on Dec. 9, opined that the Fed "can't put off preparing for rate cuts."
Differing Opinions on Interest Rates
According to Lahart's analysis, a shift towards reduced rates seems imminent, with early 2024 likely seeing Powell needing "to start preparing for it." Yet, not all share this view of impending rate reductions. JPMorgan's leader Jamie Dimon anticipates an increase in interest rates and a looming recession. On December 9, esteemed financial author and publisher Jim Grant shared insights with Forbes, asserting his belief in persistently high rates for an extended duration.
With over four decades of monitoring the U.S. central bank through his publication, "Grant’s Interest Rate Observer," Grant voiced concerns in his Forbes interview about an impending economic crisis, highlighting the U.S. economy's burgeoning debt problem, worsened by years of almost zero interest rates. He anticipates the federal funds rate remaining "higher for much, much, much, much longer."
Grant added:
"It is the historical track record, it is the pattern, that interest rates exhibit a tendency to trend over generation-long intervals."
Still, contrary opinions suggest a shift towards rate reductions by the Fed in mid-2024. In an interview with CNN, KPMG's chief economist Diane Swonk remarked, "We're moving into higher-for-long-enough." Additionally, futures markets indicate a high likelihood of a rate cut by the Fed in March 2024.
Divided Views on the Verdict
As the financial sector awaits the FOMC's verdict, views are sharply divided. In the meantime, Grant expresses concern over the credit market, burdened by years of inexpensive debt affecting businesses, consumers, and governments. Grant's opinion is very similar to Dimon's who emphasized at the 2023 New York Times Dealbook Summit he wasn't trying to scare people.
What do you think about Jim Grant's insights? Share your thoughts and opinions about this subject in the comments section below.
Frequently Asked Questions
Should You Invest in gold for Retirement?
This will depend on how much money and whether you were able to invest in gold at the time that you started saving. If you are unsure of which option to invest in, consider both.
In addition to being a safe investment, gold also offers potential returns. This makes it a worthwhile choice for retirees.
Most investments have fixed returns, but gold's volatility is what makes it unique. Because of this, gold's value can fluctuate over time.
This does not mean you shouldn’t invest in gold. You should just factor the fluctuations into any overall portfolio.
Another benefit to gold? It's a tangible asset. Gold is more convenient than bonds or stocks because it can be stored easily. It's also portable.
You can always access your gold as long as it is kept safe. You don't have to pay storage fees for physical gold.
Investing in gold can help protect against inflation. As gold prices rise in tandem with other commodities it can be a good hedge against rising cost.
It's also a good idea to have a portion your savings invested in something which isn't losing value. When the stock market drops, gold usually rises instead.
Another benefit to investing in gold? You can always sell it. Just like stocks, you can liquidate your position whenever you need cash. You don't even have to wait until you retire.
If you do decide to invest in gold, make sure to diversify your holdings. Don't put all of your eggs in one basket.
Don't buy too many at once. Start with just a few drops. You can add more as you need.
The goal is not to become rich quick. Instead, the goal here is to build enough wealth to not need to rely upon Social Security benefits.
And while gold might not be the best investment for everyone, it could be a great supplement to any retirement plan.
Should You Buy Gold?
Gold was a safe investment option for those who were in financial turmoil. However, today many people are turning away from traditional investments such as stocks and bonds and instead looking toward precious metals such as gold.
The trend for gold prices has been upward in recent years but they still remain low relative to other commodities like silver and oil.
Some experts think that this could change in the near future. According to them, gold prices could soar if there is another financial crisis.
They also note that gold is increasingly popular because of its perceived intrinsic value and potential return.
Here are some things to consider if you're considering investing in gold.
- Consider first whether you will need the money to save for retirement. You can save money for retirement even if you don't invest in gold. Gold does offer an extra layer of protection for those who reach retirement age.
- Second, ensure you fully understand the risks involved in buying gold. Each offer varying degrees of security and flexibility.
- Remember that gold is not as safe as a bank account. You may lose your gold coins and never be able to recover them.
So, if you're thinking about buying gold, make sure you do your research first. And if you already own gold, ensure you're doing everything possible to protect it.
Should you open a Precious Metal IRA
Before opening an IRA, it is important to understand that precious metals aren't covered by insurance. There is no way to recover money that you have invested in precious metals. This includes any loss of investments from theft, fire, flood or other circumstances.
You can protect yourself against such losses by purchasing physical gold and silver coins. These items are timeless and have a lifetime value. These items are worth more today than they were when first produced.
If you decide to open an IRA account, choose a reputable company that offers competitive rates and products. Consider using a third-party custody company to keep your assets safe and allow you to access them at any time.
If you decide to open an account, remember that you won't see any returns until after you retire. Do not forget about the future!
Can I have a gold ETF in a Roth IRA
Although a 401k plan might not provide this option, you should still consider other options like an Individual Retirement Account (IRA).
Traditional IRAs allow contributions from both the employer and employee. Another option is to invest in publicly traded corporations with an Employee Stockownership Plan (ESOP).
An ESOP gives employees tax advantages as they share the stock of the company and the profits it makes. The money you invest in the ESOP will be taxed at a lower rate than if it were directly held by the employee.
Also available is an Individual Retirement Annuity. An IRA allows you to make regular payments throughout your life and earn income in retirement. Contributions to IRAs do not have to be taxable
How much should you have of gold in your portfolio
The amount that you want to invest will dictate how much money it takes. A small investment of $5k-10k would be a great option if you are looking to start small. As your business grows, you might consider renting out office space or desks. Renting out desks and other equipment is a great way to save money on rent. You just pay per month.
You also need to consider what type of business you will run. In my case, I am running a website creation company, so we charge clients around $1000-2000/month depending on what they order. If you are doing this type of thing, it is important to think about how much you can expect from each client.
You won't get a monthly paycheck if you work freelance. This is because freelancers are paid. Therefore, you might only get paid one time every six months.
Decide what kind of income do you want before you calculate how much gold is needed.
I would recommend that you start with $1k-2k worth of gold and then increase your wealth.
What are the advantages of a IRA with a gold component?
A gold IRA has many benefits. It is an investment vehicle that can diversify your portfolio. You can control how much money is deposited into each account as well as when it's withdrawn.
You have the option of rolling over funds from other retirement account into a gold IRA. If you are planning to retire early, this makes it easy to transition.
The best part? You don’t need to have any special skills to invest into gold IRAs. They are readily available at most banks and brokerages. Withdrawals can happen automatically, without any fees or penalties.
There are also drawbacks. The volatility of gold has been a hallmark of its history. So it's essential to understand why you're investing in gold. Are you seeking safety or growth? Do you want to use it as an insurance strategy or for long-term growth? Only after you have this information will you make an informed decision.
If you plan to keep your gold IRA indefinitely, you'll probably want to consider buying more than one ounce of gold. One ounce won't be enough to meet all your needs. Depending upon what you plan to do, you could need several ounces.
You don’t necessarily need a lot if you’re looking to sell your gold. You can even get by with less than one ounce. These funds won't allow you to purchase anything else.
Statistics
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
External Links
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- Want to Keep Gold in Your IRA at Home? It's Not Exactly Lawful – WSJ
finance.yahoo.com
forbes.com
law.cornell.edu
- 7 U.S. Code SS7 – Designation board of trade as contract marketplaces
- 26 U.S. Code SS 408 – Individual retirement accounts
How To
Investing In Gold vs. Investing In Stocks
Gold investing as an investment vehicle can seem extremely risky these days. The reason behind this is that many people believe that gold is no longer profitable to invest in. This belief is based on the fact that gold prices are being driven down by global economic conditions. They feel that gold investment would cause them to lose money. However, investing in gold can still provide significant benefits. Here are some examples.
Gold is one of the oldest forms of currency known to man. It has been used for thousands of years. People around the world have used it as a store of value. Even today, countries such as South Africa continue to rely heavily on it as a form of payment for their citizens.
The first point to consider when deciding whether or not you should invest in gold is what price you want to pay per gram. You must determine how much gold bullion you can afford per gram before you consider buying it. If you don’t know what the current market price is, you can always call a local jewelry store and ask them their opinion.
It is also worth noting that although gold prices have declined recently, the cost of producing gold has increased. So, although gold prices have declined in recent years, the cost of producing it has not changed.
You should also consider the amount of your intended purchase when considering whether you should buy or not. It is sensible to avoid buying gold if you are only looking to cover the wedding rings. But, if your goal is to make long-term investments in gold, this might be worth considering. It is possible to make a profit by selling your gold at higher prices than when you purchased it.
We hope our article has given you a better understanding of gold as an investment tool. We strongly recommend that you research all available options before making any decisions. Only then can informed decisions be made.
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By: Jamie Redman
Title: The Federal Reserve Meeting: Speculation on Interest Rates
Sourced From: news.bitcoin.com/fed-observer-jim-grant-foresees-long-term-high-rates-as-fomc-meeting-approaches/
Published Date: Mon, 11 Dec 2023 17:30:03 +0000
Did you miss our previous article…
https://altcoinirareview.com/johns-hopkins-professor-criticizes-paul-krugmans-claim-on-inflation/
