As worldwide tensions flared up from the invasion of Ukraine by Russia, commodity prices have spiked. The high prices are most widely recognized at the gas station due to oil prices. Price spikes are seen in food, fertilizer, and strategic metals as well.
Russian debt has already been downgraded to junk status, and there are billions of foreign banks dollars tied up with debt to Russia. The amount of money lost can be detrimental to the global financial landscape and potentially crash the system. It is unlikely that any country will not be hit by an event like this causing a potential liquidity crisis. A stock market collapse on top of this could cause many to lose a lot of their money and businesses.
The impact of the Fed
The Federal Reserve has been attempting to save the system by printing trillions of dollars, but realistically this only makes the situation even worse. Many would consider the amount of liquidity added to the system to have formed a financial bubble. Now the Fed is actively removing liquidity from the system, therefore the whole financial system lies in their hands. Regardless, the signs of stagflation are an economic slowdown combined with high inflation. If GDP starts to slow down, then there is a high chance of going into a recession.
Where to invest your money
For investors who have benefitted from the Fed pumping money into the system, it would be wise to lock in profits and look for a safe haven like gold. Gold is a good asset to put your money in as it acts as an inflation hedge during times of uncertainty. More importantly, the Fed or any country cannot simply print more gold into the world. It is naturally scarce, so it is much harder for its price of it to be manipulated.
There is also the physical benefit of being able to touch your investment in real life. Stocks are simply numbers on a screen and if they crash there is nothing for you to lean back on. Gold and other metals can even be used as a currency to buy and sell things, whereas stocks rely on liquidity from the Fed to stay afloat. As the Fed removes this liquidity, it will not be great for the stock market.
Stocks are risky
The stock market has lost over half of its value historically and has even taken over 10 years to fully recover in some cases. Investing in gold has never been this sporadic and is a great asset to protect your capital with. The war going on between Russia and Ukraine may likely be the tipping point of the financial system worldwide.
This could potentially be one of the worst stock markets we have ever seen, with all the red flags lining up. The Fed is removing liquidity and raising interest rates much later than it should have. The monetary system might have had a chance given the Fed began this contractionary policy earlier. That is not the case though, and the Fed will not be able to hold the system up much longer. Simply put, the best asset to put your money in right now is gold.
Don’t let another minute go by that your Retirement accounts aren’t protected with gold. Call a Century Gold specialist today to discuss ways to safeguard your future.