2018 has been an interesting year for gold. Many are misled by the current economic boom, and feel the Federal Reserve will continue pushing up interest rates. However, the boom is mostly in the stock market, which benefits Wall Street more than Main Street. However, gold’s price has remained quite low, which has discouraged uninformed investors but is seen as a bargain for those in the know.

Could The Current Boom Actually Be A Bubble?

Investors in general are relieved at the results of the latest US midterm elections. Although the Republicans lost control of the House, leaving many to think the nation is in a type of political gridlock, many feel that the current economic boom will sustain itself for at least another twenty four months. However, other investors, such as Peter Schiff, believe that this so called boom is actually a bubble.

Furthermore, some investors don’t actually believe that divisions within Congress will produce a gridlock, largely due to the slowing economy. They feel President Trump will mostly likely be willing to work out a deal with the Democrats regarding economic stimulus, which translates into greater government spending and the deficits that come with it. This isn’t really good news for the economy, but is excellent news for those invested in gold.

Why Deficits Are Good News For Gold Investors

Economically speaking, larger deficits typically result in an economy which is more inflationary, which drives gold prices higher. One reason why gold prices have been low in recent years is because of rate hikes initiated by the Federal Reserve. Many investors haven’t been able to make the connection between the higher rates of today and the inevitable cuts that will follow. Ultimately, these hikes will most likely cause a major bubble, one which is potentially larger than what was witnessed in 2008.

The reason for this is because interest rates have remained lower for a longer period of time. This means greater distortion in the overall market, and naturally, the Fed most likely will respond through attempting to inflate another bubble, but this time rates may fall to zero. As a consequence we could potentially see further quantitative easing.

There are only so many times that the Fed can get away with doing this. Eventually, the consequences are going to be adverse, which is why it is so important to own gold and other precious metals. To shrewd precious metals investors, the current gold price is a great deal, perhaps the deal of a lifetime. This is true whether they are buying American, Australian, European or Chinese gold coins. Gold is a time tested commodity that has maintained its purchasing power for millennia and will continue to do so. Those who own it don’t have to worry about politics and who controls the House or Senate, because ultimately it doesn’t matter. What does is having ownership of a real asset that is not debt based.