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Gold News: Another Critical Fed Decision

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Gold News: Another Critical Fed Decision

Today in gold news, the Federal Reserve will announce whether they are raising their benchmark interest rate.  The announcement comes at 2:00PM Eastern time, in case you want to make a note, or watch your favorite investments to see how they react.

This Gold Enthusiast recently discussed how investors view interest rates, and the immediate impact rate changes have on gold prices. We’ve also discussed how gold prices do tend to rise in higher interest rate markets in the long term.  This is because everything gets more expensive in high interest rate environments, at least up until the point that prices collapse.

That was the strategy Ronald Reagan and Paul Volcker used in the early 1980s to fight inflation.  That effort was so successful some people think inflation can never come back, which this writer thinks is a naive view.  Of course inflation can come back; inflation means prices go higher, and last time I looked everything is more expensive now than it was in 1985.

So to get back to important stuff for today: Your friendly Gold Enthusiast thinks the Fed will raise rates today, by 0.25% in keeping with prior increases.  The stock market slumped after the last interest rate hike, so the Fed is not likely to do a double-raise today of 0.5%. That would be too risky for the current Fed. But they do need to keep inching up the interest rate while they can, if for no other reason than it gives them something they can take back if the economy suddenly tanks.  Given the recent “best ever” employment report that’s not likely, but why chance it?

And, this Gold Enthusiast also thinks gold is likely to languish here below 1300 for a while yet.  Seasonal factors that tend to support gold prices don’t kick in for another 4 weeks or so. So in this new era of making peace with North Korea, and ignoring Italy’s financial problems, there’s nothing out there to say gold should be going higher anytime soon.  Sorry, that’s just the way it looks here. For now. Things change – that’s what makes it all so interesting.

This Gold Enthusiast would also like to tip his hat to Charles Krauthammer, long-time financial author and purveyor of solid general wisdom.  His announcement last week sent shockwaves across the bow of informed financial and governmental discussion. I enjoyed reading his works over the last 7 years he was active, and have already missed his measured, calm, and insightful discussions.  Job well done sir, Godspeed and God Bless.

Signed, The Gold Enthusiast

DISCLAIMER: No specific securities were mentioned in this article.  The author is long NUGT and JNUG, and may trade these positions in the next 48 hours.

 Related: This Reason for Sluggish Gold Activity May Surprise You!

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About the author

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals.

Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach.

Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"

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