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Gold Retreats after Fed Raises Rates, but Gold Still Looks Safe Long Term

18 Jun
interest rates up June 2017

Gold Retreats after Fed Raises Rates, but Gold Still Looks Safe Long Term

Gold Market Discussion

Gold Retreats after Fed Raises Rates a Quarter Point

rising interest rates
This week gold retreated from its rally following the Fed announcement Wednesday that lifted rates a quarter point. Gold still looks safe long term, however, and made back some small gains Friday as the dollar index experienced some weakening. The dollar index strengthened Wednesday following the Fed announcement. The consumer price index and retail were down, which shows some worrying signs. The Bank of England left its rate unchanged Thursday.

What this means for investors: It is usual for gold to go down when rates go up. Lately it has been doing the opposite following the last couple of rate hikes because of uncertainty in the strength of the markets. Some investors took advantage of the dip to buy because of gold’s strong performance overall for the year so far.

Gold Still Looks Safe Long Term – Just Look at the Yield Curve

yield curveWhile short term rates are increasing however, long term rates are decreasing. The yield curve is showing alarming signs of flattening. Since Janet Yellen took over as Fed chair, it has been looking flatter and flatter. The yield curve inverts from excessive tightening by central banks. Generally when this happens, gold experiences as a rally as a safe haven alternate.

What this means for investors: For more on what this flattening yield curve means for recession, check out our blog from a couple weeks ago. Economist David Rosenberg discusses how a few more rate hikes could invert the curve, and how that historically means recession.

What Experts are Seeing Ahead for Gold and the Markets

Bill Gross discusses why the financial markets are at risk, and why quantitative easing is creating an illusion of economic growth in the below videos.



What this means for investors:When the illusion finally breaks, investors are going to want safe haven assets, and those who bought gold ahead will be glad they did so. In case you missed it in last week’s post, listen to the interview with Jim Rogers discussion the crash that quantitative easing could be preceding.

Texas Opens State Administered Gold Depository as Alternative to New York

A couple of weeks ago Arizona passed a bill that essentially renders gold and silver as legal tender. States like Idaho and Ohio are introducing similar legislation. In another example of a bid at state level to exert more control over monetary protection, Texas is opening a state-administered depository (the first in the nation) as an alternative to those located mostly around the New York area.

What this means for investors: This is mostly significant for Texas investors, or anyone wishing to keep their gold in a depository. However, it shows the high value that people are still placing on security of their money that gold provides. Currently most precious metals depositories are around New York, so this provides an attractive alternative to a wider range of people. It is expected to open in January, and will be located in Austin.

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 Here are some articles from the web discussing the topics in this week’s post:

Gold Retreats after Fed Raises Rates a Quarter Point

Read Here

Gold Still Looks Safe Long Term – Just Look at the Yield Curve

Read Here

What Experts are Seeing Ahead for Gold and the Markets

Read Here

Texas Opens State Administered Gold Depository as Alternative to New York

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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