At the time of original publication, the article described the following: This 2014 article argued that the economic recovery was not what it appeared to be. Its author contended that government presentation had led many Americans to believe there was a sustainable path of job growth, economic expansion, and a healthy housing market. According to the article, that confidence had supported relatively healthy spending during the preceding years, but cracks were beginning to appear and deserved concern. It argued that closer examination suggested the economy could be nearing a tipping point. While many economic measures could have been cited to support its view of an unhealthy economy, the article selected three figures it believed best portrayed the economic landscape and explained why gold, perhaps more than ever then, remained a solid investment.
.1%
The article reported that recently released GDP figures showed the economy grew by a whopping .1% during the first quarter of 2014! It said economists’ consensus called for a 2.5% growth rate during 2014, requiring growth of 3.5% through the next three quarters. The author saw no obvious catalyst for unexpectedly stronger growth. Interest rates were already historically low and lending was described as minimal. The article said major banks had chosen to keep excess reserves at the Federal Reserve for .25% annual interest rather than lend to people and companies. Given possible error in government data, it argued that first-quarter contraction and a recession only one quarter away were possible.
43%
Despite discussion of a strong housing market, the original article said it had recently been revealed that 43% of homes are cash purchases. It interpreted this to mean that private-equity funds, investors, and wealthy people were supporting housing, which it did not consider a sound formula for long-term success. Homeownership was also described as being at a 19-year low, even though mortgage rates had recently reached an all-time low. The article inferred that many people could not afford the minimum 20% down payment. As asset prices pushed housing prices higher, it predicted affordability would remain beyond most of Main Street.
806,000
At the time of original publication, the article described the following: The Bureau of Labor Statistics had recently released April’s jobs report and announced that 288,000 new jobs were created, surpassing consensus projections of 220,000 jobs. The article called this a phenomenal report that appeared to show the strongest job market in years, then questioned that conclusion. It said that while investors focused on headlines, further analysis showed 806,000 individuals dropped out of the workforce, lowering participation from 63.2% to 62.8%, the lowest level since January 1978! It further noted that many new jobs were lower-paid service and retail positions. Because assumed birth and death rates were included in the report, it argued that job creation might have been materially overstated. In its view, unemployment declining from 6.6% to 6.3% while participation approached a record low was inconsistent and indicated, at best, a fragile jobs market.
Why Gold?
At the time of original publication, the article described the following: The article presented the three figures as reasons it believed the recovery was weaker than it appeared and possibly nearing contraction or recession. It then asked why someone should have considered gold at that point. Its stated view was that gold often performs well during uncertainty and instability, conditions it thought might arise soon. It also described gold as a hedge against inflation and currency depreciation. Inflation had been relatively subdued earlier that year but was said to be increasing and potentially able to accelerate if banks expanded lending. The author considered a weaker dollar from continued monetary expansion more likely, noting the historical inverse relationship between dollar strength and precious metals. The article also said gold had performed well during geopolitical conflict and speculated that military conflict amid Eastern Ukraine’s effort to secede could create a long, intense war and additional uncertainty. Finally, it said current price of gold is near production costs, leading it to conclude that downside risk appeared minimal and upside potential unlimited.
