Last week, I did something in the Safe Money Report I haven’t done in years. I increased our model portfolio’s allocation to gold miners via one of my favorite exchange-traded funds.
Why? And what does that move say about my area of expertise, interest rates?
My colleague and precious metals expert Larry Edelson has several of his reasons why he likes gold and gold miners here. I happen to agree with them, and am very much worried about the increasing geopolitical turmoil we’re seeing from one end of the globe to the other.
But I’m a monetary guy, and my reason for beefing up gold exposure is simple. I believe inflation is stirring again, and the Federal Reserve is still stuck in its hyper-Keynesian, fight-the-last-crisis mentality … at a time where it needs to be shifting gears.
Look, I already showed you what the market for inflation-protected Treasuries is saying. There’s no deflation fear being priced in there like there was heading into the Great Recession.
There certainly aren’t any deflationary signals coming from the jobs market, either, or much of the other economic data. Say what you will about the hair on the latest jobs data … and there is always some hair on these things. The fact is we added another 288,000 jobs in the month of June. That brings the streak of 200,000+ reports to five months — something that hasn’t happened since 1999-2000!
The unemployment rate also fell to a six-year low of 6.1 percent. That’s well below the 6.5-7 percent range that the Fed used to say was its unofficial threshold for starting to tighten policy.
|Adding gold miners via an ETF could help protect your portfolio against inflation.|
Prefer to use the U-6 unemployment rate, which includes all kinds of discouraged or underemployed workers? Okay. It was higher at 12.1 percent in June. But that was still down from 14.2 percent a year earlier … and the lowest since October 2008.
A separate Labor Department report called”JOLTS” also showed 4.6 million job openings in the month of May, the most in seven years. Some 2.53 million Americans were confident enough in their ability to find new jobs that they chose to leave their current one in May. That’s the highest”quits” level going all the way back to June 2008.
Official government-tracked inflation rates are already picking up. Not just headline, but the core inflation rates the Fed watches closely. And we all know that everything from college tuition to gas and oil to food to health insurance and rent is rising, meaning our personal inflation rates are much higher than what Washington claims!
So the question is no longer “Why should you own gold”? It’s “Why the heck shouldn’t you own it”?
Everything I’m seeing tells me that we’re back in an inflationary environment, and that the Fed will likely get stuck”chasing” inflation higher. Yes, it will cut QE to zero in the next couple of months. And yes, after that, it will have to raise interest rates. But it will likely remain stuck one or two steps behind rising inflation, rising gold prices, and rising long-term interest rates.
So quit falling for the Fed excuse-makers and apologists! Don’t listen to the big, bloviating bond fund managers who say rates will stay low forever (conveniently, something that would prevent you from yanking even more money from their underperforming funds). This is a new and evolving economic environment — one that absolutely REQUIRES you to have inflation protection.
If you want to see what I’m recommending investors buy, look no further than the Safe Money Report. There’s still time … but not much … to read the blockbuster, inflation-focused issue that just went to press (and to buy my favorite gold mining ETF mentioned in it!). Just click here or call us at 800-291-8545 to get your hands on it!
Until next time,