After a 30-year record price increase in gold during the first quarter of 2016, Blanchard and Company CEO David Beahm feels both gold and silver are poised to attain to higher highs during the remainder of 2016 for several reasons, including decreased consumer spending evidenced by weak GDP growth, and a stagnant global economy that has generated new negative-interest stimulus efforts by various central banks.
Gold prices should continue to climb throughout 2016 as investors look for stable assets during what appears to be a troubling time ahead, Beahm said. Consumer spending accounts for two-thirds of Americas total GDP, but through the first quarter of 2016 it is about one-third less than predictions for the year and well below its performance in 2015. This is not a sign that the economy is flourishing quite the contrary in fact.
Beahm said that the outlook for any real overall growth in GDP is dependent upon increased consumer spending because economic headwinds from abroad, business capital spending, financial market turmoil and inventory accumulation are playing a big role to stymie growth without it. Gold and silver have already benefitted from this lack of growth and should continue to over the long-term.
As we await first-quarter GDP data [which printed at 0.5% after Beahms statement] and the inevitable revisions to forecasts for the second quarter and beyond, here is a sobering factoid despite having some the smartest minds in Washington, in five of the last seven recessions the Fed was oblivious to them at the beginning of the quarter each began, Beahm said. With equities markets near all-time highs, yet fundamental economic data painting a less rosy picture, Blanchard sees precious metals that are still at attractive price levels with lots of upside.
Beahm also said that the global attempt to re-energize economies using negative interest rates is going to fail investors, with the outlook for savers being particularly bleak. As governments consider the idea of negative rates, investors should realize there is a distinct possibility that this may be a stimulus effort of last resort as economies slow down. Precious metals are the right investment diversifier to protect wealth when inflation increases and the economy gets volatile, Beahm said.