Monday, September 19, 2016

As the Fed prepares for interest rate decision this week, recent history shows gold to climb no matter which way they go

In the past one could accurately predict what would happen to the price of gold when the Federal Reserve chose to move interest rates either higher or lower.  But with the markets now fully manipulated from the central bank's use of QE and stimulus, and both stocks and bonds in over-priced bubbles, rationality and fundamentals no longer are relevant.

In recent history, gold has more often than not risen no matter what the Fed has done because the markets are ruled in large part now by uncertainty.  When the central bank began its five year move of lowering interest rates back in 2010, and printing money to buy bonds, stocks, and any and all assets they could get their hands on, the markets had supreme trust in the Fed, and it was reflected in the drop in gold from an all-time high of $1940 to its pre-December 2015 low of $1045.

But as we have seen for the last 10 months, every time the Fed issues a formal statement to either raise rates (December 2015), or make no changes (All of 2016 to date), gold has responded in kind to the upside.

January 27 FOMC Meeting - Gold Up

March 16 FOMC Meeting - Gold Up

April 27 FOMC Meeting - Gold Up

June 15 FOMC Meeting - Gold Up

July 27 FOMC Meeting - Gold Up

September 21 FOMC Meeting - Gold ?

So when interest rates were raised in December of 2015, the gold price went up.  And subsequently after every single FOMC meeting this year, the price also went up when they did nothing.

Interest rates are still near zero, with the Fed desperately afraid to both raise them up prior to the election, or lower them down into negative territory like in Europe and Japan.  And it is in part to this schizophrenia and loss of confidence in the central bank that will very likely keep gold prices going up for the foreseeable future.


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