Money

Did “ Interest Rate Fears Trample Gold ” Last Week?

By – Mike Fuljenz

Last week’s Wall Street Journal featured a post-mortem on gold’s decline with the headline, “Interest-Rate Fears Trample Gold.” The two loaded words in the middle of that headline (Fears Trample) was somewhat inaccurate. The article said “Fed officials are debating when to raise interest rates, a move that would further diminish the case for owning gold.”  However, this “debate” is one-sided.  The Fed’s “doves” (who favor continued super-low rates) out-number the “hawks” by 5-to-1.  Some debate!  Yes, the hawks had their say, but the doves – led by the Queen of the Doves, Janet Yellen – will carry the day.

The Federal Reserve did NOT raise any fears of rising interest rates last week.  They seemed to bend over backward to say that they would delay any rate increases until a time of near-perfect economic growth, sometime in mid-2015 or later.  Here’s the specific evidence from public statements released last week:

First, the Fed released the minutes of its last Federal Open Market Committee (FOMC) meeting, which revealed that the majority doves were very worried about problems in the labor market.  As a result, the FOMC consensus was that the Fed should keep key interest rates low for “some time.”

Then, in her talk at Jackson Hole, Wyoming, Ms. Yellen said that the Fed would wait until U.S. economic growth strengthened before raising rates, adding this caution: “…if economic performance turns out to be disappointing and progress toward our goals proceeds more slowly than we expect, then the future path of interest rates likely would be more accommodative than we currently anticipate.”

She also said that we should not be fooled by the drop in the unemployment rate, since the labor market participation rate is so low.  She said that there is still a lot of “slack” in the labor market, so she asked Fed observers to be more patient in setting dates on when the Fed will eventually raise key interest rates.

So, please scratch these “high interest rate fears” off your list of things that could “trample” gold prices any time soon.

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Sandra

God’s Word never fails!!!! It says in the last days , precious metals will be of value. Paper money will be trash.

boldaq

Anybody know the answer to Gene’s question?

Peter

I am tired of these gold companies pushing gold. They must think we are stupid. They project gold prices are going to double or at least surpass 2000 oz.. If owned a ton of gold at today’s price – why would I sell my gold to anyone if I knew the price would double or triple. I would hold on to it at ride it all the way up to “billionairedom”. The same with those oil contracts.which I have not seen really advertised for a few years with endless radio commercials. The reason is oil companies have been riding their oil holdings up because they knew the increase would triple their wealth. When they think (know) the price of oil will go way down – then – and only then you again the commercial pushing oil contracts. When companies are pushing gold the KNOW the price is coming down. or… Read more »

Gene

In a major market crash or when the dollar value drops more due to too much printing will gold and silver go up in value?
A simple question that should be answered.

PaulE

I’m less interested in a transitory shift in the price of gold, than I am in the long-term damage the Federal Reserve is doing to the economy by artificially suppressing interest rates. In realistic terms, due to the very real potential for political fallout that would result from the Federal Reserve actually starting the process of trying to restore interest rates to something approaching nominal values, it is unlikely we’ll see any action in this area until well after the 2016 elections. That means no change for at least another two and a half years. So for any seniors who don’t own any stocks, bonds or other assets as a way to generate retirement income, and are solely dependent on bank savings accounts and low interest CDs, this is the far more important aspect of the story for them. More years of getting effectively nothing for ultra-conservative investments. Even for… Read more »