Saturday, March 11, 2017

Fed gold cycle number three: Severe pullback and selloffs before next rate hike on March 15

As we enter into the coming week of expected turmoil and potential extreme chaos in the economic and geo-political worlds, one asset appears to be following the same path it did just prior to Federal Reserve rate hikes that took place in December of both 2015 and 2016.

Leading up to the first rate hike in nearly a decade back in Dec. of 2015, the gold price was taken down under the expectation that higher interest rates would be an anathema for the precious metal.  And for a short time following the hike in rates, gold did indeed drop to a multi-year low of $1048 before subsequently skyrocketing to $1250, and later $1380 in 2016.

Image result for gold price chart 2015 fed rate hike

Then following the 2016 Presidential elections in November we began to see this same cycle occur as expectations of a another interest rate hike by the Fed in December rise in probability.  And sure enough gold was taken down into the $1100's before moving back up near the beginning of 2017.

Image result for gold price chart december 2016

And now in March of 2017 we stand on the cusp of another rate hike by the Fed, expected to occur from their meeting on March 15.  And like clockwork since the probability of an increase in interest rates shot up in late February, gold has been slowly declining for a month leading up to the decision.


Three cycles all occurring with the same price action for gold.  Which means that if the historic trends continue as they have for the two previous rate hikes in December of 2015 and 2016 respectively, we can expect the gold price to rebound within a couple of weeks after the March 15 decision.

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