Two Assets to Watch as Rates Hold Steady
The Weekend Edition is pulled from the daily Stansberry Digest.
A "divided" Fed is keeping rates steady...
On July 30, the Federal Reserve kept its benchmark bank-lending-rate range right where it has been for seven months, between 4.25% and 4.5%.
It was what most folks expected. But things in Fed land aren't as vanilla as the decision suggests.
The central bank's regular post-meeting statement included no shocking language, with minimal changes from its last one in mid-June. But it did note that two Federal Open Market Committee ("FOMC") members – Chris Waller and Michelle Bowman – voted against Fed Chair Jerome Powell and the group's decision to maintain rates.
This is the first time two FOMC members have dissented from a rate decision during a Fed meeting since 1993. Waller and Bowman said they preferred to lower the federal-funds rate by 25 basis points.
Some politics are involved here, we suspect.
Waller has been mentioned as a possible replacement for Powell as Fed chair after his term ends in May. So has Bowman, though less so. They just put themselves down as the "low-interest people" that President Donald Trump is seeking to lead the Fed.
Trump has been crystal clear in his preference for lower rates. So far, he hasn't gone as far as trying to fire Powell before his term as chair ends. But maybe that's coming...
Powell was not ready to bend just yet...
In his post-meeting press conference, the Fed chair said the labor market remained "solid" while inflation remained "somewhat elevated relative to our 2% longer-run goal."
That doesn't make for a great case to lower interest rates. But as we reported last week, the catastrophic jobs report that came out after the Fed meeting might change that picture.
However, Powell also continued to say tariffs are an obstacle to rate cuts...
In his opening statement, he said that "services inflation has continued to ease, while increased tariffs are pushing up prices in some categories of goods." He added that there is still a lot of uncertainty around the influence of tariffs... The inflation risk might stick around, or it might not.
So, to Powell, the central bank is keeping policy "modestly restrictive." However, he left the door open for changes down the road...
Despite elevated uncertainty, the economy is in a solid position... We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments.
He also said inflation is on a path to a 2% rate, suggesting that the Fed could find reason to lower rates... eventually.
Investors should keep an eye on two major stores of value as this interest-rate story plays out...
It's Time to Buy Gold
The first asset to watch is gold...
Looking at the technical picture of gold lately – plus the idea that the Fed could lower interest rates – has me thinking of something longtime former Gold Stock Analyst editor John Doody once told me...
As he explained, the very best time to buy gold (and gold stocks) is right before the Fed shifts to a "loose" monetary policy. That is, when the central bank takes its foot off the economic brakes and hits the gas pedal.
If that happens, look out... because the technical setup for gold looks appetizing right now.
Our colleague Sean Michael Cummings shared the following chart in the July 28 issue of DailyWealth. According to Sean, gold's price for the past few months suggests a break higher could be ahead...
Gold has been making a series of higher lows since April... so its $3,435 ceiling likely won't hold for long. Sean also wrote about how global central banks are providing a huge tailwind for gold prices, and that demand shows no signs of relenting.
Yesterday, the metal was trading above $3,390 per ounce. And this is all happening within a much-longer-term bullish setup for gold.
Bitcoin Isn't in Bubble Territory... Yet
Also, don't bet against bitcoin...
That's the case that DailyWealth Trader editor Chris Igou recently made to his subscribers.
Depending on your view, bitcoin can be anything from a "risk on" asset in the short term to an inflation hedge over the long run. (I happen to think both.)
In any case, sentiment around bitcoin has been getting more positive lately. It's back near all-time highs, and it moved above $120,000 last month.
Since its lows around the end of 2022, bitcoin is up around 630%. But it may still have room to run higher before hitting a peak.
A few indicators suggest this, including one that our Crypto Capital editor Eric Wade trusts: the "Pi Cycle Top." This indicator, based on a set of moving averages, would have correctly alerted people to each major top in bitcoin going back more than a decade now.
In January, Eric said he expected bitcoin to reach a "bubble stage" sometime this year, with the price ultimately reaching around $200,000 or $250,000.
One factor is the Trump administration's friendliness toward cryptos. Another is a consistent four-year cycle of price action in the world's most popular crypto, which suggested bitcoin hadn't reached a peak yet.
And Chris recently took a look at another interesting indicator – Google Trends data. He said this indicator suggests sentiment around bitcoin hasn't yet hit the "euphoric" levels that you would expect to see at a top in its price. As he wrote two weeks ago in DailyWealth Trader...
Here's how it works... The day with the most Internet searches for bitcoin gets a reading of 100. And anything less than that is expressed as a percentage of that highest reading.
If there are more people searching for a term today than on the previous high, today will become the new high-water mark.
In the chart below, you'll see that searches for "bitcoin" are only at a reading of 23 today based on this indicator...
Previous peaks for Google-search interest in bitcoin coincided with major tops in its price in 2017 and 2021. In December 2017, bitcoin hit $19,041, up 1,900% from the end of 2016. As Chris explained...
Millionaires were being minted seemingly overnight. Euphoria took over by December, with Google searches for bitcoin skyrocketing. Then, right when everyone was all in on bitcoin, the bottom fell out.
Bitcoin fell from above $19,000 per coin to below $3,200 per coin by December 2018... an 83% crash in about a year. Folks who bought in when euphoria was highest got crushed.
The second peak happened in 2021. Folks weren't searching for bitcoin as much as in 2017, but you can see the surge up to a reading of 44 that year. That's the second-highest reading on record.
Again, that was right as bitcoin started to top. Sure enough, the easy money was over. And a 77% crash came shortly after.
Chris says there will likely be another "crypto winter" at some point. But we're not close to peak euphoria and a change in seasons in this space.
If the Google Trends reading surges above 40, "that's when I would start to be cautious," Chris concluded. "We aren't there yet."
Good investing,
Corey McLaughlin with Nick Koziol
Editor's note: Our colleague, crypto analyst Eric Wade, has more 1,000%-plus winners than any other analyst in our firm's history. But he believes one financial story breaking out of Washington could be the most significant moneymaking opportunity he has ever shared. On August 12, he's revealing all the details... including why what's happening could open a rare window of opportunity to earn 10 times your money or more.