The idea of rising interest rates has been pondered by markets for some time. Given some recent commentary, it seems that the pace of rate hikes could potentially be even faster than originally anticipated.
Speaking on Friday in Chicago, Fed Chairwoman Janet Yellen reiterated that an interest rate hike “would likely be appropriate” if the economy remained on track. Her comments come after several other central bank officials have also made more hawkish comments about the economy and pace of interest rate hikes.
The central bank has penciled in three rate hikes for 2017, now some are suggesting that a fourth hike would not be out of the question.
What might that mean for gold?
Probably not too much, actually.
Assume for a moment that the central bank does in fact hike rates not only three times this year but four. By historical standards, the Fed funds rate would still be very low.
A Fed funds rate of two or three percent is not likely, in our view, to damage sentiment surrounding the gold market.
Recent price action in the gold market may potentially be indicative of that very hypotheses.
Gold has been trending higher since bottoming out following the Trump election victory. Gold has moved significantly higher, even as stocks have continued to make fresh all-time highs and as the dollar index has risen along with interest rates.
If the notion of rising rates is so bearish for gold, how does one explain gold’s recent ascent?
Gold may potentially be in a position to rise with or without higher rates. Along with its potential to add portfolio diversification, there are numerous issues that could potentially fuel investment demand for gold.
Sovereign debt levels remain at unsustainable levels. Paper currencies will still lose value over time. A recession could be around the corner. There are a number of geopolitical issues that could potentially fuel risk aversion.
The list can go on and on.
Stocks have been moving higher for several years now. At some point, the bull market will potentially give way to the bear market. At some point, inflation may potentially take a bite out of purchasing power. At some point, global trade could be very different from how it is today.
Despite any of these factors, gold will still have value without any counterparty risk.
Don’t let the idea of higher rates scare you away from adding hard assets to your portfolio that may potentially provide a meaningful hedge against a number of economic and geopolitical issues like inflation or declining currency values.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold ownership. Our associates are here to answer any questions you may have, and can even show you how to buy and hold physical gold using your IRA account.
Don’t wait for gold prices to rise further before taking action. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, debt levels, dollar index, gold, interest rate hike, janet yellen, trump economy