Posted on 06/17/2021 10:48:43 AM PDT by BenLurkin
The Federal Reserve surprised the market Wednesday with projections that future interest rate hikes will come a bit sooner than expected. Gold bugs in particular were disappointed.
The price of gold fell 4% Wednesday and was lower again Thursday, falling below $1,800 an ounce for the first time since early May. While it's true that gold often rises along with inflation fears, Wall Street may have already priced in this scenario. Investors appear to be selling gold now due to expectations that the Fed is taking the threat of inflation more seriously and may move more aggressively to tamp it down.
Higher rates would be bad for gold, which would lose its luster compared to other assets including bonds that tend to benefit in a rising rate environment.
Naeem Aslam, chief market analyst with AvaTrade...said gold is now of "less attractive interest" and that if the price remains below $1,800 an ounce, the yellow metal could be vulnerable to an "intense sell-off."
(Excerpt) Read more at cnn.com ...
No serious gold investor is dumping gold because interest rates might rise 1/2 a percent 2 years from now.
In the long term, what do you think will hold its value: the dollar or gold?
Still waiting for $1,000 an oz. That is when I will get in.
Trade-in your physical gold for rectangular pieces of green paper being issued at a rate of 120 billion per month - before its too late!!
No but I sold my gold stock on prices dropping.
Didn’t buy gold to “hedge “ against inflation. Bought gold and silver to trade when the country collapses. It’s going down, it’s going to get bad. We’ve been warned for 20 years this was coming and it’s almost here. No one is stepping up to make things better. Republicans are spineless, Wall Street is all set. They have plenty of money. It’s the rest of us that’ll need that little extra.
“Inflation fears”—lol.
Inflation is here, now—nothing to fear, it is here!
Headed back to 13% Prime Rates....................
Good was $400 an oz before obummer got elected.
Interest rate hikes mean a bigger portion of the federal budget will need to be allocated to interest payments on federal deficits. I doubt politicians want that. They’d rather impose an inflation “tax” - and then blame the Fed.
Invest in politicians. Mainly democrats. They have a good payoff for their friends.
Yep
Friends...don’t mix your political principles with survival in this very economically volatile times. I learned that the hard way.
I was in Ukraine 12/13 years ago when the banking system froze and the local currency tanked in the forex market. ATM and credit/debit cards didn’t work. Store merchants only wanted Dollars or Euros instead of the legal tender HRYVNIA. That is until armed police officers showed up with Hryvnias and demanded they take the sinking currency because they themselves had to buy food for their own families. They did and we all got our food using the Hryvnia.
LESSON LEARNED - so long as the police and military are paid in dollars as the Legal Tender currency in this country you’d better have some on hand to feed yourself and your family. It ain’t going away no matter how devalued it becomes. Legal tender laws WILL BE enforced.
bookmark
> No serious gold investor is dumping gold because interest rates might rise 1/2 a percent 2 years from now. <
The whole thing is ridiculous. The Fed said it might possibly raise interest rates a little in 2023 instead of in 2024. That implies absolutely nothing.
Did you say 120 billion a month? I better get on that before they run out!!!
The Federal Reserve’s projections show an interest-rate increase to 0.6% from 0% currently by the end of 2023, a bit sooner than what was anticipated. Also, more Fed members now see a rate increase in 2022. This comes after the producer-price index, released Tuesday, rose more than expected, excluding food and energy.
Still, the Fed isn’t exactly upending its easy-money policies. It is continuing to purchase $120 billion a month in bonds. The more money the central bank plows into the bond market, the higher the price and the lower the yield of those bonds. Stock investors want to see lower bond yields, which boost the present value of future profits. The higher expected benchmark interest rate, though, casts doubt over how long treasury yields can remain low.
Overall, “the market may be reacting to the change in the dot plot [rate increase schedule] that now shows more officials indicating a rate increase is coming in 2022,” writes Mike Loewengart, head of investment strategy at ETrade.
The negative market reaction to the Fed wasn’t just seen in the major indexes, but also in the number of stocks that fell. About 77% of S&P 500 stocks fell, according to FactSet data, indicating that investors are indeed concerned about higher yields, which has at least some negative impact on all stocks.
But this wasn’t a nasty selloff. All three major U.S. indexes rose from their intraday lows and the breadth of S&P 500 stocks that were in the red fell significantly from above 90% earlier in the day. That isn’t a surprise to Jim Paulsen, chief investment strategist at The Leuthold Group, who says, “I don’t see how that much changed today. I think they’ve [Fed members ] been pretty clear in what they’re doing, that they’re gonna run this [economy] hot.”
In other economic news, housing starts for May came in at 1.57 million, below the estimate of 1.63 million. Building permits were 1.68 million, below the expected 1.73 million.
That’s so funny that they worry about 2023 today.
You are right. Gold dropped during stagflation.
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