Was the Fed More Dovish Than Expected?

Last week, the FOMC meeting took place over Tuesday and Wednesday with the central bank’s decision to raise the Fed Funds rate by a quarter point being announced at the meeting’s conclusion.

The decision to hike rates came as no surprise. The Fed had taken steps to inform markets that a rate hike was not only possible but likely coming several weeks ago. Clearly, the Fed did not want to upset financial markets by catching investors off-guard with an unexpected rate hike.

The Fed did such a good job, in fact, that the significant amount of hawkish rhetoric seen in recent weeks had many analysts discussing the possibility of a change to the Fed’s forecast. The central bank was sounding considerably more hawkish and investors had to contemplate the possibility of an extra fourth rate hike this year.

The Fed seen last week, however, was decidedly more dovish. The central bank did not make any changes to its forecast, and is still anticipating three rate hikes this year and another three in 2018.

The slow and steady pace of rate hikes could potentially mean a few different things. Perhaps the Fed is concerned about the fragility of the recovery and does not want to send investors running for the hills. Perhaps the economy is weaker than it appears, and the central bank does not want to rock the boat. Perhaps the Fed is OK with being behind the inflation curve.

Either way, a fragile economy or inflationary pressures can both be bullish for gold. If the Fed lags behind, inflation could potentially accelerate, reducing purchasing power in the process.

If the Fed gets more aggressive with rates and policy, it could stomp out the economic embers that it has taken so long to get going. A more aggressive Fed could potentially send the stock market into a tailspin, a significant move lower that could also potentially be good for gold.

Do not forget the aging bull market in stocks, either. The bull has entered its eighth year and could be getting fatigued. At some point, the market may turn-and turn hard. Much of that investment capital could potentially find its way into gold and other perceived safe haven assets.

With other countries still actively engaged in the game of ultra-low rates and QE, it is difficult to imagine a situation in which rates in the U.S. head significantly higher any time soon. This could also potentially be bullish for the metals complex.

If you do not already have an allocation in physical gold, now may be the ideal time to consider one. Gold can potentially add further diversification to your holdings, and may also potentially offer a meaningful hedge against inflation, declining currency values and more. Adding gold to your portfolio has never been easier.

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 build a physical gold portfolio using your IRA account.

Don’t wait for the next stock market crash or for inflation to take a bite out of your purchasing power. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started.

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