How Will Gold Respond to a Fed Rate Hike?
Summary
This week on Wednesday brings the long-awaited Federal Reserve meeting, where the US central bank is expected to raise interest rates by 0.25% to a new range of 1.25% - 1.50%.The mainstream media, including many well-respected outlets such as Bloomberg, continue to report the long-standing myth that rising interest rates are negative for precious metals.We wonder where Bloomberg gets this data from – as both past and present examples show that rising Fed-controlled interest rates are decidedly positive for gold prices.The most recent increase of this cycle, which occurred on June 14, 2017, saw gold close at $1,260 in the futures market after the post-Fed trading witnessed a decline for the day on the idea that the Fed would begin balance sheet “normalization” by selling some of its Treasury holdings.Top – US 3-month treasury yields, which have been spiking in the weeks prior to each Fed rate hike, thus serving as a leading indicator.