NEW YORK (TheStreet) -- Despite the announcement of a strong consumer spending data for the month of March, indicative of an improving economy, the S&P 500
The Commerce Department said Thursday that consumer spending increased 0.9% in March. This shows the economy is picking up after a cold winter stalled growth in the first quarter. And impressively, the increase in March is the highest since August 2009.
Jobless claims in the U.S. also fell to 6.3% in April, according to the U.S. Bureau of Labor Statistics, which is the lowest since September 2008. That's a 0.4% point decrease compared with March 2014 and better than the 0.1% point decrease predicted by analysts. All of these bode well for the economy and stocks going forward.
But the concern is with the growth rate. Let's face it, with these improvements being the best in four to five years, there is no arguing economic growth is slow. For a growing economy, these figures should be overtaking other figures from maybe 2013 or, conservatively, 2012, but definitely not 2009 and 2008. It just shows that the growth rate is low.
Moreover, the unemployment data from the eurozone don't indicate a global economy that's improving at a fast rate. For instance, in March its unemployment rate was held high at 11.8%. And this has been the trend over the past few years.
In general, when the economy is growing at such a slow rate, paper assets becomes more volatile, as we're closer to a recession than boom. The point here isn't to say that we'll be in a recession soon. The point here is to emphasize the need for a well-balanced portfolio, which protects your wealth in this period of economic uncertainties.
One of the best ways to diversify your portfolio is by adding some precious metal -- notably gold and silver -- to your portfolio, since they usually move counter to the paper money. A binary options platform reported on April 30 that "Expectations of a reduction in economic stimulus by the Fed, coupled with forecasts of strong employment figures from the world's top economy pushed contracts for the precious metal [gold] down."
By adding gold and/or silver to your portfolio, you'd be reducing your exposure to paper money volatility. Moreover, the fundamentals for these precious metals are strong. Granted, they have not been performing well in recent times. But the indicators we have say the future of these metals will be good.
For instance, in a recent report from the World Gold Council, China accounted for 26% of the global private-sector gold demand in 2013 thanks to low gold prices.
The report also contains a Chinese consumer survey, which says that 60% of Chinese gold consumers expect the price of gold to increase over the next 12 months. This means that we might see more gold going toward the east over the next 12 months. The increasing demand for gold in China suggests that gold is currently undervalued - which is evident in the slow economic growth we are seeing.
In addition, the rapid growth that the solar industry is seeing also means that silver is well positioned for a surge. This is because, according to the Photovoltaic Technology Division of the U.S. Department of Energy, "silver paste is used in 90% of all crystalline silicon photovoltaic cells, which are the most common solar cell."
Moreover, with the latest report from Intergovernmental Panel on Climate Change, or IPCC, saying drastic actions have to be taken to limit green house emissions so that global temperature can be maintained at the safe two degree Celsius below pre-industrial levels, we can expect the solar industry to grow at a faster pace over the next few years. In the end, silver will benefit.
Long story short, while the government might have announced impressive economic data, it's not enough just yet to show that the economy is moving forward. So it shouldn't stop investors from hedging their portfolios.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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