Rate Hike or No, Dec. Fed Meeting Will Be Bullish for Gold (Video)
-- Published: Thursday, 12 November 2015 | Print | Disqus
After a year of anticipating a Federal Reserve interest rate hike, all eyes are on the Fed’s December meeting. There are two obvious outcomes: the Fed does raise interest rates or it does not. In his November Gold Videocast, Peter Schiff explains why both scenarios are bullish for gold. Peter points to the behavior of gold under both Alan Greenspan and Paul Volcker as proof that a rising interest rate environment isn’t automatically bearish for the yellow metal. On the other hand, if the Fed continues to delay raising interest rates, investors will begin to realize their expectations were ill-founded and reconsider their positions in gold and silver.
Either way, investors who have been waiting to buy should thank the Fed for extending the opportunity to buy gold for less than $1,100 an ounce.
Stay tuned for a full transcript.
0:10 – The price of gold has declined almost $100 in the last month. This is an excellent opportunity to buy gold for those who were afraid of buying during the rally.
0:45 – Gold traders started selling when the Federal Reserve failed to remove the possibility of rate hikes in December, as well as the better-than-expected non-farm payroll report for October.
1:45 – There are two possibilities for gold traders to consider: the Fed either will or will not raise interest rates in December. Both options are bullish for gold.
2:30 – Most traders thinks higher interest rates will hurt the price of gold.
3:00 – The gold market has already discounted the gold price based upon expectations of a rate hike.
3:31 – If the Fed does raise rates a small amount in December, they will reassure the markets that ongoing rate hikes will be extremely slow and measured.
4:40 – Once the Fed begins to raise interest rates, the market will begin to anticipate the next easing cycle.
5:13 – This period of economic expansion and recovery will end sometime in 2016.
6:00 – The US dollar has already rallied for the same reason gold has declined: the anticipation of rising interest rates.
6:25 – When Alan Greenspan last raised interest rates at a “measured pace,” gold rallied the entire time, while the dollar sold off. It’s a myth that higher interest rates would automatically be bearish for gold.
7:00 – High real interest rates would be bearish for gold, like the economic environment under Paul Volcker. That is not going to happen. Even with a slight rate increase from the Fed, the real rate will still be negative.
8:03 – The other possibility is that the Fed doesn’t raise interest rates, proving the rumors of a rate hike were false. If that happens, gold sellers will reconsider their assumptions about Fed policy.
9:10 – The opportunity to buy gold under $1100 is unexpected, but the Fed provide a double bottom in the price by keeping the possibility of a December rate hike on the table.
Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast. Interested in learning more about physical gold and silver? Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!
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