The Federal Reserve has said it will keep buying at least $120bn of debt per month until “substantial further progress has been made” in the recovery, strengthening its support for the US economy amid a surging coronavirus outbreak.
The guidance from the Federal Open Market Committee came at the end of a two-day meeting during which Fed officials upgraded their economic projections but maintained predictions that they would keep interest rates close to zero until at least the end of 2023.
The language on debt purchases mirrors the Fed’s pledge to keep interest rates close to zero until the economy reaches full employment and inflation is on track to exceed its 2 per cent target for some time. (Source: Ft.com)
If you read the lines, you’d spot two three key factors that will drive the US economy to recovery in 2021/2022;
- the increased supply of US dollars to aid the circulation of more money.
- interest rate is expected to remain at the zero region for at least 3 years and
- the increase in inflation above 2% threshold.
Interestingly, these are key factors that are supportive of US dollar weakness in coming months, and at the same time drive gold prices above its 2020 all-time high of $2075.
From historical trend, US dollar and gold price tends to trend in opposite directions – a weak dollar is bullish for gold while a strong dollar leads to sell off.
If you are interested in 1 local stock that will benefit from the US Fed policies, watch the video and see the reason Japaul Gold and Ventures will be a big winner in 2021.
I bought the stock at 25kobo after the company announced its plan to divest into gold mining. With price closing at 34kobo, my equity holding in the company has appreciated by 36%.
Yes, I know the company plans to raise more cash via right issue which may dilute its earnings, well! this is another opportunity to load more as I plan to hold the stock for atleast 6 months to 1 year.
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