There are signs that the U.S. economy is beginning to struggle, and this is nothing but good news for gold, says one investment expert, who expects the bulls to continue charging ahead on their current upward trajectory.
Axel Merk, the president of Merk Investments, says that it’s a case of when not if when it comes to rate cuts by the Federal Reserve. That’s great news for gold, with experts unanimous in the boost this will deliver to the precious metal.
Merk is firm in his belief that we have seen the peak of rate increases, with cuts the next logical policy step. What’s more, he believes gold prices won’t have to wait for cuts to actually take place to feel the benefit on the price front. Just the suggestion that they are making their way down the pipeline could be enough to spark a rally.
He says, “The market is always forward-looking, so we don’t actually need the Fed to start cutting rates for gold to move. There just needs to be the perception that it will happen. People are buying gold because they believe the downward pressure on rates is coming.”
The economic slowdown could also be worse than expected, with the much-touted soft landing not assured. This would give the gold bulls additional momentum he says. “I think we’ll have a more severe recession than is currently priced into the market, which means the Federal Reserve will have to take rates down further. And that’s just because, historically speaking, there’s always a soft landing before there’s a hard landing.”
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