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Thursday, December 27, 2018

"Mad Money" Host Disagrees With Latest Rate Hike But Sees Potential in Gold

Jim Cramer believes latest rate hike was ill-advised.

potential bull run for gold

Last week, the Federal Reserve met market expectations by raising the borrowing rate another 25 basis points, reported CNBC, bringing it to a total of 2.5%. Addressing the public after the hike, Fed officials hinted towards less hikes in 2019 but appeared confident in their decision to raise rates four times this year.

According to the CNBC article, even before the latest hike, many criticized the Fed for ignoring important data metrics and instead, powering through with their agenda. Just days ahead of the hike, President Trump took to Twitter to criticize the Fed's policy amid a possible slowdown of the U.S. economy.

In Thursday's episode of "Mad Money", CNBC host Jim Cramer underlined why this month's hike was ill-advised, especially in the context of additional rate hikes in 2019. Additionally, he pointed out that the central bank's hawkish tone can only persist through willful oversight of important data.

This includes a projection for slower GDP growth in 2019 and the looming threat of maxed-out employment. According to the article, some have also felt as if the Fed is turning a blind eye to the recent stock crashes and what they might mean for the economy going forward.

To Cramer, the last point is especially poignant as stock investors have been placed on thin ice by the Fed's hawkish rhetoric. The host shared his view that equity investment right now hinges on the chance that Fed Chair Jerome Powell becomes more recipient towards red flags and simmers down on tightening.

Despite the concerning implications of future rate hikes, Cramer reminded viewers that there is always a profitable market out there. After four rate hikes in 2018 and promises of several more next year, Cramer sees little alternative to gold investment as the best possible bet.

The analyst said we will see a bull market in gold as the true state of the economy becomes apparent, reports CNBC. In particular, Cramer pointed to several sliding stocks as proof that the economy is slowing down faster than Fed officials would like to admit.

While rate hikes are considered bad for gold, the markets usually price in future hikes months before they happen, alleviating any downside to the metal. With so many cautioning against the consequences of successive rate hikes in a slowing economy, what is usually seen as a headwind could act as the catalyst for the next bull run in gold, stated the article. Cramer certainly seems to think so, as the host compared his feelings of distress post-hike to the tense atmosphere of 2007, right before the global financial crisis hit.

Tuesday, December 4, 2018

Precious Metals Analysts Bernard Dahdah Sees Gold Shining in 2019

Natixis sees imminent economic growth slowdown and accompanying upturn in gold.

natixis sees gold going up

As gold investors try to guess what 2019 could bring, one French bank is bullish on the metal's prospects next year amid a change of economic climate in the U.S. Talking to Kitco, Natixis' precious metal analysts Bernard Dahdah said his bank sees an imminent economic growth slowdown and an accompanying upturn in gold prices.

The average domestic investor has had little difficulty maintaining optimism this year. The Federal Reserve proceeded with its hawkish agenda, backed by positive economic data reports and a high-riding dollar. President Trump's historic tax cuts also extended his campaign promise of a reinvigorated U.S. economy. But according to the Kitco article, several flash crashes in the U.S. stock market, most recently in October, affirmed to investors that trouble might be brewing.

Dahdah points out that market participants were quick to rejoice over tax cuts while ignoring the more significant issue of budget deficit. Whereas the cuts were only intended to serve as a short-term stimulant, the article writes that the $985 trillion of projected deficit for 2019 is a long-lasting issue without an easy solution.

Dahdah expects the U.S. deficit to become more prominent next year and force government officials to take a step back. The fading of the stimulus effect will place further pressure on stocks, likely leading to more corrections. Meanwhile, the Fed will wrap up its tightening cycle after years of successive hikes.

According to the article, this environment of stagnant growth and tumbling stock valuations will play directly into gold's hand as investors rush to move away from riskier assets. The weakening of the dollar, expedited by the change in Fed's policy, will remove additional pressure from the yellow metal. Dahdah said that the dollar index will face more hurdles as central banks around the world commence their own tightening.

The return of uncertainty will quickly bolster gold prices, and Dahdah sees the metal averaging $1,275 an ounce in 2019. However, the analyst noted that gold has plenty of catalysts waiting in the wings, and that the metal could shoot up to $1,350 an ounce next year.

Natixis also sees great things in store for silver after a middling year. According to the article, the bank predicts silver will catch up to gold due to renewed interest in commodities, thereby closing the gap in the highest gold-silver ratio since 1993. Dahdah said that investor demand will push silver to an average of $16 an ounce in 2019 with the possibility of a climb to $18 an ounce.