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For over a year now, a number of companies have been busily advertising the idea of home gold IRA storage. By this they promoted the possibility of you setting up a custodian company in order to manage and vault your retirement holdings precious metals that you bought for your Self Directed IRA at home. This has been a questionable practice and grey area of the law since Home Storage Gold IRA companies first suggested it. As the Wall Street Journal has warned earlier this month, the IRS is taking an unfavorable view of this method now. Read on to learn what the controversy is surrounding the Home Gold IRA storage and if it is worth the risk for your own gold holdings.

What the Ads and the IRS Say About Home Gold Storage

This past summer, the advertisements have been particularly prolific on IRA Home Gold Storage. They have insisted that you are able to use the funds from your tax deferred retirement vehicles to purchase gold and other precious metals. The promotions from firms like Augusta Gold and Hartford Gold Group say that you can then store them wherever you would like, including at home or in a bank safe deposit box. Other companies sell packages that set you up an LLC company to be custodian for the gold.

This has not yet been tested by the courts or the Internal Revenue Service directly, but the IRS issued a set of guidelines that apply to the storage of Self Directed Gold IRA holdings. Most recently, earlier this month the IRS has issued a stern warning against the home gold storage concept and on following the rules that they have laid out. This comes in response to the multiplication of ads promoting the concept both online and on the radio. The Wall Street Journal wrote a significant piece about it several weeks ago. In this they stated that “the Internal Revenue Service is not too keen on the recent advertisements suggesting retirement savers store their tax-free individual retirement account funds in gold at their house or in safety deposit boxes.”

Home Gold Storage Might Be Legal if Done Correctly

The biggest problem regarding storing IRA gold yourself is that the law is mirky on this point. Self Directed IRAs are not allowed to hold collectibles of any kind. This includes art, gems, wine, or antiques. They are permitted to hold funds in the form of bullion coins and bars in precious metals that include gold, platinum, silver, and palladium.

Home Gold Storage Is Not Cheap

Other Reasons to Be Cautious About Home Gold Storage

These are not the only reasons to be careful about LLC IRA Home Gold Storage. The structure does not have clarity on which coins and bars can be held in such an entity. This could be an issue for investors even if the IRS gives the LLC concept a pass when it finally rules on the matter. These rules on controlling and third party managing IRA assets are complex. You could easily make a mistake and be in violation of them by accident.

Besides the costs of setting up these LLCs, there is also additional work and expense in keeping up the entity’s operating agreements and filings with the state. The fees involved with the LLC would mount if you wisely consulted with a CPA or attorney on all transactions and filings with the account. This is the cost of preparing your LLC IRA to hopefully withstand any challenge that the IRS makes to it in the future.

The Safest Way to Hold Gold in Your IRA

The safe and proper way to have gold in your IRA is to follow the IRS guidelines exactly. This means that you should pick out a third party administrator and custodian like Regal Assets. They will buy the approved coins or bullion on your behalf from a dealer which is reputable and dependable. Finally, a custodian like this will store your gold and other precious metals in a third party vault that is IRS approved. Some of these are likely located close to where you live. This way you will not accidentally run afoul of the IRS in the future and potentially suffer from both penalties and taxes on your IRA purchases of precious metals.

The World Gold Council’s semi annual Gold Demand Trends report is always a much anticipated publication in the world of the yellow metal. It is considered by authorities to be the foremost resource in the industry for data on gold demand. This year’s first half report did not disappoint. Contrary to what you may hear in the media from time to time, gold demand continues to grow in most important categories. In several critical ones, it set new records and near records. Read on to see why this continues to offer tremendous support for your gold retirement holdings and future gold prices.

Gold Enjoys Second Highest First Half Demand On Record

Gold is basking in the near record high for the first half total demand. Thanks to the Q2 continued growth of 15%, it achieved the second greatest first half in the gold data records. This amounted to a total demand for gold in the first half of 2,335 tons. ETFs were the star performer with an impressive +579 tons added. The second highest first half on record occurred even in light of weak jewelry demand that struggled in a scenario of substantially higher prices. Gold rose over 24% in terms of U.S. dollars, and even higher in other currencies as this chart shows.

Record Investment Demand Breaks Great Recession 2009 Prior Highs

Investment demand is the category that really put overall gold demand over the top in the first half of the year. The old record had been set during the panic and fear that pervaded global markets in the low points of the Great Recession in 2009. For 2016 first half, the total investment demand amounted to 1,064 tons. This represented a 16% greater amount that in 2009 H1. In fact investment has now been the biggest single part of demand for gold over two consecutive quarters for the first time in recorded history.

Nearly half of all the aggregate gold demand in the first half of 2016 came from this investment demand. A significant trend was the increase in interest from Western investors. The lion’s share of the demand came from the West instead of the East. Investors from all parts of the spectrum contributed to this encouraging sign. This ranged from institutional investors to retail investors buying into such diverse products as gold backed ETFs, coins, and bars.

A variety of reasons propelled the western investors towards the safety of gold for the first six months of 2016. This began in the first quarter and only increased during the second quarter. The monetary policy that global central banks have pursued is a significant factor. The negative interest rates promoted by the European Central Bank, Swiss National Bank, and Bank of Japan sent investors looking for better opportunities. At the same time, analysts and investors began to come to grips with the idea that the U.S. interest rate hikes would be delayed. These combined at the same time as increasing sentiment that the several year downtrend in gold had reached its end.

Uncertainty only added to these motivations. Geopolitical concerns that ran the gamut from political to economic events encouraged people to find the higher quality, tangible, and liquid asset of gold. The June 23rd British Referendum that built up to a stunning Brexit leave vote brought the period to a close. At the same time, the contentious and uncertain U.S. election campaign was already in full swing. Italy’s banking crisis became more evident during this period as well. These three reasons gave plenty of motivations for investors to move into gold.

The bigger smart money investors were not the only ones crowding into the safe haven appeal of the yellow metal. Small scale investors have also shown their strength and interest in a number of Western countries. American gold Eagle coins witnessed an 84% boost in demand. In Britain, the Royal Mint enjoyed a dramatic increase in its profits. The Mint announced that its products jumped in demand in the wake of the Brexit referendum. It’s new Signature Gold program that permitted investors to buy partial gold bar holdings online proved to be extremely popular. Throughout the other countries in Europe, smaller investors snapped up coins and ETFs wherever they could.

ETF’s Outshine All Other Gold Sectors

The chart below gives you an idea of just how powerful the ETF demand for gold turned out to be in the first half of 2016. It was especially impressive when compared to the prior three years.

Gold backed ETFs outperformed every other single vehicle in the gold investment category. The demand for these ETFs approached 580 tons, higher than even the 458 tons last seen in 2009 first half in one quarter alone. These exchange traded funds have grown in appeal beyond Western nations. Investors from China increased their gold investments in such products to 24.4 tons through the conclusion of June. This represented a nearly four times gain from the end of 2016. It will be interesting to see how well this demand continues to perform when profit taking sets in at some point.

In any case, the shift towards gold ETFs is real and impressive, especially with the bigger Western investors. Q3’s data is likely to pick up much of the post Brexit ETF demand, since the vote happened in the last eight days of Q2. The data so far shows that investor demand for gold after the Brexit uncertainty has been global. On the referendum day, Google Trends witnessed an over 500% surge in Internet users searching for the phrase “Buy Gold.” Baidu, China’s search engine, also experienced a 44% increase in the keyword “Gold” search for the seven days following the referendum vote (versus the year before).

Gold Supply First Half Increase Lowest In Nearly A Decade

It is also interesting to note that as gold demand was making all time and near time highs, supplies were not massively increasing. The supply for the first half of 2016 grew only 1% compared to the same period the year before. This represented the slowest growth rate in gold supplies for a first half in eight years. It should not come as a surprise to you that gold prices are doing so very well in light of the impressive demand and constrained supply for the first half.

Just last week, you read here about how Deutsche Bank predicted the fair value of gold should be at $1,700 or more per ounce. Their argument was based on the expansion of the central bank balance sheets from the world’s four major central banks the U.S. Federal Reserve, the European Central Bank, the Bank of Japan, and the People’s Bank of China. In an interesting twist on the idea for substantially higher gold prices, Macquarie Bank Research has attempted to explain why gold has not rocketed up to its literal or inflation adjusted high from 2011.

The 2011 Inflation Adjusted High for Gold

Gold reached just over $1,900 per ounce in 2011 before it began a steady pullback and correction lower. In terms of the inflation adjusted high from that point five years ago, this represents a $2,000 per ounce price today. Yet gold is is mired in the lower $1,300’s per ounce price range. This is not an insignificant price when you consider that it is up over 24% on the year. It is a poor price point if you consider that the yellow metal has experienced a record surge in investment for 2016. As Macquarie Research pointed out in their report they released last week, today’s $1,325 per ounce is still almost $600 below the actual 2011 high and nearly $700 away from the inflation adjusted one. They give several reasons to explain this phenomenon, all of which deserve closer scrutiny.

Why Gold Has Not Reached Its Inflation Adjusted High

The Macquarie Research department analysts have three main arguments for why they believe gold has not reached or exceeded its over $2,000 inflation adjusted high. Even at the high of this year at $1,366 so far, gold remained 28% short of its literal $1,900 high. They attribute its lack of better performance to a stronger U.S. economy, a mightier U.S. dollar, and lack of more physical demand.

This does not mean that the analysts at Macquarie predict gold will fall from its current levels. They are still bullish on the future prices. Instead they claim, “Our expectations for these suggest slow appreciation for the gold price is more likely than a spike higher.”

Is the U.S. Economy Really Significantly Stronger Today Than in 2011?

The Macquarie analysts’ research pins a lot of their explanation for still tame gold prices on a stronger U.S. dollar and economy. It is hard to argue that the dollar is stronger. This is an objective measurement against its major currency peers. As the chart below shows, the U.S. Dollar index has increased from below 80 in 2011 to over 95 in 2016. This argues that the dollar has definitely gained in value against its major peers over the last five years.

It is worth noting that the dollar index is actually down from its five year high of around 100 that it notched at several points in 2015. This makes the argument that the dollar is stronger relative to 2011 valid but not compared to much of 2015.

You could say the same for the U.S. economy as a whole. GDP growth in 2011 came in at plus 1.7%. Yet so far for 2016, the first two quarters have the country’s GDP up .9%. Even when you look at the last four quarters of data for the U.S. GDP, you still only get an annualized growth of 1.2% since mid 2015. By this most important measure of the U.S. economy, the growth actually remained greater in 2011 and 2012 than it has for 2016.

Yet the Macquarie Research analysts still maintain that “The macroeconomic backdrop is less supportive, and this boils down to the fact the U.S. economy and economic outlook is not in the same dire straits that it was in 2011.”

They are basing much of their argument for a solid U.S. economic recovery being underway on the rising value of the dollar and increase in real bond yields. They claim that today’s real interest rates and dollar level show a greater amount of confidence in the U.S. economy than in either 2011 or 2012. It all depends on which economic statistics you look at and versus what year as to whether or not this is actually the case.

Is Physical Gold Demand Really Down?

The other argument that the Macquarie Research team made for why gold prices have not appreciated as greatly as they should is that the holdings of exchange traded funds and physical gold have not increased sufficiently. They admit that the stocks have grown by record or near record amounts for 2016 at the same time. A look at the World Gold Council data shows that first half of 2016 investment demand of 1,064 tons beat the previous record set in the first half of 2009 at 917 tons. ETF Gold demand for 2016 first half of 579 tons almost equaled the entire year demand for 2009 of 645 tons and vastly surpassed 2011 and 2012’s full year totals. Total H1 2016 demand reached 2,335 tons, which is the second highest first half demand on record.

All of this means that Macquarie Research analysts have looked at the economic data in particular ways to make this case for why gold is lower than the 2011 highs. In fact the price should be closer to those highs and it will likely move that way over time so long as gold demand remains strong and economic uncertainty persists. Do not let anyone talk you out of your gold retirement and physical holdings in the meanwhile.

Gold has rallied impressively so far in 2016, but this does not yet mean that it is yet fairly valued. When the commodity is measured against central banking balance sheet expansion, fair value figures significantly higher than $1,300+ per ounce appear. This is not just an idea suggested by fringe elements predicting imminent financial collapse. Though Zero Hedge raised the idea of higher gold prices based on central bank money printing over a year ago, Deutsche Bank has recently gone to great lengths to make the case for substantially higher real values for the yellow metal.

The Case for Why Gold Should Be Substantially Higher

In July of 2015, financial site Zero Hedge brought up the idea that gold prices should actually be substantially higher based on the incredible expansion of central bank balance sheets. This was at a time when gold prices had pulled back significantly to just under $1,200 per ounce. The chart demonstrates what they predicted would be fair value for the safe haven metal currency based on the continuous growth of the major six central bank balance sheets. It takes into account the U.S. Federal Reserve, European Central Bank, Bank of England, Swiss National Bank, Bank of Japan, and People’s Bank of China.

As you can see, Zero Hedge’s chart assigned a nearly $1,800 per ounce fair value to gold. That was a year ago, before the European Central Bank had been creating euros to purchase bank and financial assets throughout the eurozone at the rate of another 80 billion euros per month. It also predated the latest round of asset purchases that the Bank of Japan announced. Today this above chart would reflect an even higher price.

Keep in mind that at the time the price of gold had fallen considerably. One of the arguments in favor of higher gold prices surrounded how tight the physical gold supplies were. This supply constraint existed while demand remained extremely high for physical supplies of the precious metal.

Deutsche Bank Explains Why Gold Should Be Valued Much Higher

Well respected and mainstream international investment bank Deutsche Bank is now thinking along similar lines at the end of August 2016. Their analysts find a positive relationship between the prices of gold and the amount of monetary expansion that central banks pursue. Per this relationship, they claim that the yellow metal should be trading around $400 per ounce higher. What makes this claim interesting is they are not even considering as many central banks as did Zero Hedge with their 6 institutions.

Deutsche Bank is only looking at the activity of what they call the four main central banks of the United States, the ECB, Japan, and China. These four central bank balance sheets have grown by 300% from the start of 2005 to date. At the same time as these combined central bank balance sheets were expanded this much, the above ground world gold stocks increased by 19% in terms of tons. This amounts to a gain of around 200% in gold value, per the August 26 report of Grant Sporre and Michael Hsueh the Deutsche Bank commodity analysts.

Grant and Michael claimed that “If we were to assume that the value of gold should appreciate to keep the overall value of the big four aggregate balance sheet equivalent to that of the value of the above ground gold stocks, then gold should be trading closer to USD1,700/oz.”

This is an astounding claim from one of the largest investment banks in the world. They have made the case for gold prices being nearly $400 per ounce higher based on the growth in the world’s major central banks’ money supply. For a mainstream bank to treat gold as the currency it truly is represents a major coup for the yellow metal.

Deutsche Bank Stops Short of Predicting Near Term Gold Price Adjustment

Deutsche Bank’s impressive claim does not mean they are projecting gold will roar up to $1,700 in the near term. In fact, the report’s two authors noted that the metal is unlikely to reach such a price point soon. They feel it could even lose momentum short term.

“Let us be clear; we are not saying that gold will trade up to USD1,700/oz in the near term, but when viewed against the aggregated balance sheet of the ‘big four’ global central banks (the Fed, ECB, BoJ and PBoC) the argument can be made if we view gold as a currency, the metal is worth closer to USD1,700/oz, versus the spot price of USD1,326/oz,” they claimed.

Their argument for why gold would need more time to rise to $1,700 has to do with the momentum this year for central banks growing their balance sheet. For the year so far, gold prices have risen faster than the central bank money creation. This is why they feel that appreciation in gold prices will slow down for now. In any case, this fair value price for gold from Deutsche Bank is more encouragement to add it to your retirement accounts.

From time to time, you hear rumblings about a renewed gold standard. This is more often the case as financial crises continue to roil international markets every few years. U.S. Republican Presidential candidate Donald Trump has a senior economic advisor who is putting forward the idea again. Dr. Judy Shelton recently revived the gold standard in an interview she did with Fortune Magazine.

Who is Economist Dr. Judy Shelton?

Donald Trump recently appointed two economists to his all important economic advisory team. Dr. Judy Shelton is the only woman who has been named to it. She is both a co-director and senior fellow at the Atlas Sound Money Project. Their goal is to encourage the use of dependable money as well as to increase awareness with the potential built in problems of the present day monetary system. Dr. Shelton achieved fame as she correctly forecast the Soviet Union’s economic collapse two years before it occurred in 1989. This all matters enormously because Donald Trump is a businessman who surrounds himself with highly qualified people and then relies on their advice. If she is calling for a gold standard, then you can be sure the Republican presidential candidate is seriously considering it.

Trump’s Advisor Shelton Proposes A Gold Standard Return

Dr. Shelton was asked about her thoughts on a gold standard and she had interesting answers. For starters, she does not have any opposition to holding another international Bretton Woods conference. She also believes that it is not necessary to bring around numerous other countries to the idea at the same time. This is because the U.S. holds a unique position as the owner of the still dominant international reserve currency. It means that any action that the U.S. takes unilaterally would quickly work its way through to the other global economically important countries.

Trump’s economic advisor also has a refreshing perspective on gold as a relevant asset. To her the gold standard is forward thinking and sophisticated. Gold is both universally accepted in and neutral for all countries. As a standin for money, it has no time or border constraints. Consider the world’s most significant countries economically. Their foreign reserves are heavily or mostly kept in gold. This in itself is argument enough that gold is not a barbaric relic from the Middle Ages.

A Gold Standard Starts With A Gold Convertible Bond

You may wonder how the United States could actually begin to implement such a revived gold standard in practice. The answer is by starting with a gold convertible bond. This is not an idea that originated with the Trump campaign. Former long time Federal Reserve Chairman Alan Greenspan first suggested it back in 1981. Dr. Shelton has been promoting the idea for a number of years. A gold convertible bond could begin under the auspices of a pilot program. It might operate like a TIPS bond. These help people who are worried about the dollar’s future value to receive an inflation adjusted amount back. The gold convertible bond would allay the concerns of individuals who fear a future financial system meltdown. Gold as the ultimate insurance generally rises as financial uncertainty reigns.

One group that would love such gold convertible U.S. bonds would be the Chinese. They have trillions of dollars in American government bond holdings which would be better protected and stabilized. The Chinese have likely considered this type of instrument themselves as they have massively increased their gold reserves over the last several years. They would likely offer a similar or even parallel bond. This is where Dr. Shelton thinks it could prove to be a stabilizing force for currencies. If the United States and China both had a five year bond that paid in a choice of their own currencies or a single gold ounce, then the two bonds would be worth the same amount.

Over time this program could be picked up by other economically central nations such as Germany, Switzerland, and the United Kingdom. This would lead to a new exchange rate system that was both stable and backed by gold. Market forces would still determine the value of the currencies, but the equivalent amount of gold underlying the gold convertible bonds would smooth out the wild swings.

Belief In Another Economic Crisis Strengthens The Need for A Gold Standard

This idea of gold bonds leading to a revived gold standard of sorts becomes more important if you believe there will be another economic meltdown in the future. Donald Trump has discussed his belief in the possibility for another more serious economic crisis. Dr. Shelton calls it the elephant in the room that no one else much wants to discuss. The imbalances which caused the 2008 financial crisis have not been solved. A gold standard or at least gold bonds are a good idea to protect the stability of the financial system. In the meantime, physical gold holdings offer you the best chance to protect yourself and your retirement accounts.

Institutional Investors are a group that you may not think about much. The larger ones can be incredibly significant where investing is concerned. These pension funds and sovereign wealth funds have billions of dollars to invest. Because of this, they have to choose their investments and markets carefully or they will literally move the prices higher as they buy. It is important to understand the predicament these massive investors are facing lately as they are likely coming to the gold markets before long.

Major Institutional Investors Have Few Viable Investment Choices

The bigger institutional investors have their favorite markets. They like sovereign government bonds. The problem with these lately is that an enormous number of them are providing negative yields. A shocking $13 trillion of these bonds come with sub zero yields. Many of them are issued by governments that have high debt to to GDP ratios. This includes countries like Japan whose government finances are shaky and which have not experienced meaningful growth in years.

Major institutional investors also tend to favor stocks. The sovereign wealth fund of Norway alone owns 5% of all stock securities in the world. The problem with these investments is that many stock markets throughout the globe are trading at or near their all time high levels. This is the case even though the profits of many corporations have proven to be in long term decline. Even putting money into bank accounts provides negative interest rates in a significant and increasing number of nations. This means that you or the institutional investor must pay the bank to hold your money for you.

Institutional Investors Need Larger Markets to Deploy Capital

The fact is that the larger institutional investors possess significantly fewer investment choices than do retail investors. Outfits with $100 billion or more to invest need huge markets to put their capital to work in successfully. Groups with hundreds of billions simply can not buy smaller real estate holdings like houses, apartments, or even commercial buildings. Senior investment managers at sovereign wealth funds have said stated that they can not even contemplate investment deals that do not start at a billion dollars or higher.

This pushes these investors into those favorite few markets mentioned above. The U.S. Treasuries markets are an incredible $19 trillion. Billion dollar investments can move in and out of this government market with ease. Stocks are the same. The enormous public companies like Apple, Vodafone, IBM, and Wal Mart have hundreds of billions of dollars in market capitalization. The problem with these markets is that they are already trading at or near major or even all time highs. Government bond yields are paying their lowest amounts in history in many countries (and many are now negative). Stocks continue to trade at all time highs even though the underlying profits are declining.

A number of the institutional and sovereign wealth funds from Europe and around the globe have turned to the United States’ market believing that this is their safe haven from troubled countries in Europe and the Brexit worries. They are doing this when the U.S. dollar is at highs not seen in multiple decades. Stocks and bonds in the country are also trading at record levels. The major institutional investors do not like to purchase assets that are trading at these historic levels if they can help it. They are taking on significant risks in doing so. Markets may pull back on them, and the U.S. dollar may correct back down.

Gold is A Large Enough Market and Not At All Time Highs

This is where gold comes into the picture. You may not be aware of how large the gold market is. The World Gold Council estimates it to be over $7 trillion. This may not be the largest market on earth, but it is significant enough to absorb billions of dollars. Central banks have proven this is the case as they grabbed literally hundreds of tons in gold over the past several years. Just last year, China purchased tens of billions of dollars in gold.

Gold has a substantial advantage over bonds and stocks. It does not trade anywhere close to its record highs, especially when measured in U.S. dollars. Gold can rise to $1,900 per ounce before it runs up against this level. This means it has over 40% to go higher before it would smash through this dollar price per ounce. While gold has appreciated significantly this year, it is still relatively inexpensive when measured against recent historical prices. This makes gold more or less the one substantial asset type which is not approaching record highs that is still significant enough for the major institutional investors to buy. As sovereign debt piles only increase and central banks continue to print more money gold should draw in more of the major funds which are desperately searching for places to park their investment dollars.

In Conclusion

Gold makes sense for you for similar reasons. It is the only true global asset that is extremely liquid and gains in value as central banks and governments lose control. This is why it should have a place in every investment and retirement portfolio.

It is always positive for gold when new precious metals products are launched. This demonstrates that the demand for and interest in the metal is not only stable but improving and growing. In the last few days, gold and silver have received this vote of confidence as a new range of precious metals offerings will soon start trading in London. This should provide resilient gold prices with even more support in the coming year.

New Gold and Precious Metals Products and Partnership

The World Gold Council is the strongest promoter of the safe haven metal in the world. In the second week of August they announced an exciting collaboration with several key market and industry players in London to come out with a whole suite of new precious metals products. This is called the LMEprecious. The new platform for trading the precious metals is a joint venture between the The London Metal Exchange, World Gold Council, and a diverse variety of important international banks. Among the investment banks participating in the new exchange are Goldman Sachs, Morgan Stanley, Societe Generale, ICBC Standard Bank, Natixis, and OSTC. This new suite of products will be traded on the new exchange and centrally cleared. The LMEprecious is set to launch in the first six months of 2017 once they finish clearing it through the regulatory approval process and testing out the integration of the system.

This LMEprecious will increase the choices available to members of the precious metals community. It will offer a new means for discovering price, trading, and managing risk in an advanced market structure. Many market players feel that gold will benefit from a greater transparency that the exchange pledges to provide. The initiative promises to increase access to the market and make it more efficient to trade gold. Besides this, it will strengthen London’s already important position as a world gold and precious metals trading center.

Importance of the London Gold Market for the New Products

London has been a world gold trading center since the early 1700s. At the time, gold mined as remotely as Brazil arrived in London for assaying and refining. This activity only increased from the 1850s. Gold rush deposits from South Africa, California, and Australia arrived to be refined and then later sold on the London markets. The London Good Delivery List developed as a result. Gold trading and mining customers from across the globe began to operate bullion accounts with the different bullion clearing houses in London. This locally based London gold trade became known as Loco London. Soon third party transfers of bullion in London became commonplace. This tradition continues today through the London bullion clearing system and the London Bullion Market Association. Nowadays gold and precious metals bullion are traded around the clock in an over the counter arrangement for transacting spot, options, and forward contracts.

The host of this new LMEprecious exchange will be the London Metal Exchange. This outfit has the honor of being the industrial metals trading world center. Over 80% of worldwide non steel metals trading business happens on their markets. With the already well established London position as a world gold center and the globally leading industrial metals exchange participating, the new products should become a successful offering and make gold trading increasingly available and important. The Chief Executive for the World Gold Council Aram Shishmanian believes this will bring the gold market into a more technologically advanced position. He stated, “This is another important step in the modernisation of the gold market. It will strengthen London’s position in the global gold market, enabling it to meet the needs of all participants, attract new players and satisfy the highest standards of regulatory compliance.

How The New Precious Metals Products Will Work

LMEprecious will include a wide range of offerings for both gold and silver. There will be spot price products, daily and monthly timeframe futures contracts, and options including calendar spreads. These sophisticated contracts allow participants to not only trade current gold prices, but to take positions on various future date prices. Later on, the exchange is going to add contracts for the other precious metals in the complex platinum and palladium. All of the trades will clear centrally on the LMEs real time clearing house the LME Clear. Participants will also have the ability to clear trades that are phone based. The infrastructure for delivering the products is already in place in London. The liquidity for the trading of the contracts will come from the previously mentioned list of banks. Their impressive group of financial institutions which are onboard will guarantee depth in the market and tight, efficient pricing. The partnership is also inviting others to participate if they desire.

It is interesting to note that the new offerings are not intended to replace the already existing over the counter market. Instead they are meant to complement it and bring in new participants to and trading in the precious metals. The increased attention and trading coming to the safe haven metals are good reasons to continue to add gold to your retirement portfolios.

It almost seems like the Fed is almost looking for excuses to hold off on raising interest rates anymore. This has a lot to do with their ongoing private concerns about continuing problems in the world economy as shown in the aftermath of the Brexit vote and with peripheral European banks still looking shaky. Italian banks seem particularly troublesome these days. These were all reasons enough to keep the Fed on hold last month. The latest excuses which they are leaning on this time around are based on lower oil prices helping to keep inflation down and more importantly weaker U.S. economic data.

Low Inflation and Falling Oil Prices Another Excuse for the Fed

One thing that stays the Fed’s hand is tame inflation. If inflation is low, the pressure for them to raise the rates drops significantly. Oil prices have been slipping into dangerously low territory for the producers again, helping to keep inflation down. The data Tuesday showed that inflation is even lower than expected. Tuesday also saw the release of data demonstrating weakening business investment on top of the already low economic growth rate for the second quarter. Economists have suggested that taken together, these three reasons are enough to keep the Fed on hold at present low interest rate levels for several months. These reasons all feed on and into each other as you will see.

Oil Overproduction and Supply Glut Continues to Pressure Prices

Old worries are plaguing the oil markets once again. An increase in production by OPEC nations, domestically in America, and Russia all at once and at the same time that demand for the crude product is down have caused both overproduction and a glut in supplies that has built up in storage tanks. Traders have become increasingly concerned about this and have bid oil down to a close of less than $40 per barrel on Monday of this week. This is the first time the West Texas Intermediate benchmark has managed this feat since April. As oil prices drop, stock markets decline with them and the fear continues to spread. The last thing the Federal Reserve wants to do is raise rates when the markets are unsettled. It also helps to explain gold’s resiliency over $1,350 per ounce.

U.S. GDP Grows at Less Than Half the Rate Expected for Second Quarter

Another reason that oil prices are down is because demand is down. Oil demand typically drops when economic activity is less robust than the Fed desires. On Friday, economists and Fed watchers alike felt the jolt when their hopes for a second quarter GDP increase of 2.6% were dashed. In fact they and Wall Street were all off substantially, as growth came in at less than half the expected number at 1.2% for the second quarter. To make matters worse, the first quarter GDP took a revision down to a mere .8% growth.

These numbers are still expansionary, unless you take the point of view that the one economist who had expected worse numbers did. Chief U.S. economist at Deutsche Bank Joseph LaVorgna claims that these numbers were really worse than they looked on the surface. By another measure he explained, the economy is on the brink of recession. The majority of the growth came from consumer spending that commonly comprises about 70% of the U.S. economy. In the last few quarters, it has managed a bigger impact. LaVorgna stated that if you take out the gains in personal expenditures from the past four quarters, then growth in the U.S. economy drops to -.2%. Because of the danger that consumers may be starting to wobble, he sees an increased chance of recession. LaVorgna and Deutsche Bank estimate that the odds of such a recession are actually one out of three now.

Again all of this information feeds through to other data. The fact that business investment is also declining at the same time as oil prices are dropping, inflation is coming in significantly below its normal trend, and the economic growth is slowing substantially points to the very real possibility of a slowdown if not an actual recession. This is all enough to give the Fed pause for thought this month regarding interest rates.

Disappointing Auto Sales Raise Concerns

A last worrisome bit of information that bears on the level of consumer spending comes in the form of the July auto sales. July was expected to be a strong month for car sales because they have two extra selling days and increased incentives on a variety of models, per a statement by Kelly Blue Book Senior Analyst Karl Brauer. Yet after months of significant growth, auto sales disappointed significantly for the month. Ford suffered an unanticipated 3% decline in its overall July sales made worse by the 9.3% decline in its car sales. GM similarly suffered a July sales decline. Fiat Chrysler reported that it experienced weak growth of .3% when economists were predicting a 2.2% increase for them in the month.

These auto sales could be a sign of more trouble to come. If the consumer goes down for the count, then the Fed will have plenty of reason to be worried about the state of the economy. Whatever happens to the future growth of the U.S. economy, gold will still be a good place to hedge your other investments and protect the value of your retirement portfolio.