The economic degradation*: what will happen to gold?

Countries are in need of support

Instability in a number of countries of the world is reflected primarily in the economic sector. Concern and discontent become the norm for the population that objects to the harmful changes in society.

In France, the civil unrest occurs, while the president’s popularity is declining every day. The French economy and financial system are weakening. The economic growth slows down quarterly by 0.2%.

The protests undermined the French economic sector – more than 15 million euros in damage.

The German economy is weakening. Volatile government policies can entail a serious economic and social catastrophe. The German economic advisers reconsidered the economic growth forecast for 2019, current projections have been changed from 1.5% to 0.8%.

The headquarter of the European Central Bank in Frankfurt am Main, Germany.

The British government spent two years trying to leave the EU. Uncertainty in relations with Europe has affected the slowdown in economic growth to 0.2%. Brexit* forced the UK to leave the top five economies in the world.

The British pound dropped by 20% against other currencies due to uncertainty and risk.

In different countries, paper money quickly loses its leading positions. Analysts all over the world warn of the impending collapse of the dollar. If the world's largest economy falls apart, serious consequences are imminent.

The Fed on the economic slowdown

The meeting of the Federal Reserve System* was held on March 19-20, 2019. Ten participants, led by the Fed’s Chairman Jerome Powell, decided to maintain the current interest rate until the end of 2019. During the final March meeting, the Fed noted a slowdown in the economic activity, resulting in the need to preserve the parameters of the monetary policy*.

After clarifying the assessment of the prospects for the economy, the American dollar lost its positions, which immediately impacted the price of gold.

Upon the final meeting of the Fed, the price of an ounce of gold was $1,312.

Over the week, the price of gold increased from $1,303 to $1,316.

The role of gold as a defense mechanism against chaos

Money is devalued, economies become unstable, and ordinary people feel lost, they cannot make the right decision on how to protect themselves in an era of crises. Experts are certain that, given the degradation of the economy, gold will regain the “safe haven” status.

The Swiss analysts issue a warning: as soon as the economic collapse begins, acquiring the only protective asset, namely gold, won’t be easy. At some point, no physical gold will be for sale.

The head of the Swiss management company Matterhorn Asset Management (MAM) Egon von Greyerz believes that the current price of gold reached the starting point for the future long-term growth.

The price of an ounce of gold in dollars (1970-2019)

Analyst Chris Looney from the Canadian global investment bank RBC Capital Markets has no doubts that the rise in gold prices will be cumulative. In his opinion, within the next two years the noble metal will increase in price. The price increase will be caused by trade wars, a rising inflation, an uncertain policy of the Federal Reserve System and a weak global economy.

Gold is a reliable asset for your Financial Security

Glossary:

*Degradation — a gradual deterioration, a decline.

*Brexit — the withdrawal of the United Kingdom from the European Union.

*The Federal Reserve System — aka the Fed, is the independent agency that oversees the commercial banking system and acts as the central bank of the United States.

*Monetary policy — the plan of actions aimed at maintaining the monetary system and ensuring the effective functioning of the economy.