It’s Time to Hold More Cash and Buy Gold

Wednesday, May 20, 2015
By Paul Martin

By: GoldCore
GoldSeek.com
Wednesday, 20 May 2015

– Bank of America advises owning gold
– Markets in “Twilight Zone” transition period
– Fed policy normalisation poses risks
– Own gold and cash to protect against “cleansing drop in asset prices”
– Data show markets disconnected from reality
– Fragile system vulnerable to shock
– Gold is hedge against systemic risks

Gold is a regarded as a hedge against market turbulence by Bank of America who, in a note to clients, advised holding gold and paper currency at this time.

Bloomberg report that Bank of America Merrill Lynch describe the markets as being in a “Twilight Zone” – the zone between the end of QE and the Fed beginning to raise rates to try to bring normality back into the markets.

The note highlights two problems with raising rates which are prolonging this sojourn in the Twilight Zone. The first is that the real economy in the U.S. is not currently strong enough to withstand a rise in interest rates.

The second is that raising rates could cause a shock to the markets and the economy as the practically free money juicing the markets comes at a more realistic cost and some government, corporate and household debts become unserviceable.

For these reasons, Bank of America believe that the Fed is far from taking action to return the markets to normality and “the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes.”

To deal with this they advocate adding gold to one’s portfolio along with higher levels of cash. Citing factors such as liquidity, profits, technological disruption, regulation, and income inequality they say there exists a potential for a “cleansing drop in asset prices.”

The Rest…HERE

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