The gold market may see some volatility ahead of this week’s FOMC meeting conclusion. The yellow metal is likely seeing some profit taking ahead of the central bank’s announcement, but that certainly does not mean that the market will not head higher in the coming weeks and months.
The Fed may be forced to act this week in order to maintain credibility. The Fed has stuck to its guns in recent communications, and thus far appears to be remaining on track for another two rate hikes this year.
Some analysts have recently suggested, however, that the central bank could potentially decide last minute to put off another 25 basis point hike until its next meeting.
What could possibly fuel some disagreement among the fed at this point?
The stock market could certainly play a major role in any such decision by the central bank. Tech stocks have finally come under some pressure, and if some significant selling is seen early this week, it is feasible-albeit unlikely-that the Fed could elect to hold off on further tightening.
Even if the Fed does hike again this week, however, it is appearing more likely that it would then hold off on any further action until December. In fact, the consensus estimate for the year-end yield on the 10 year Treasury note was just lowered once again to 2.7%. This would seem to be strongly indicative of investors betting the fed sits tight for a while.
There is a lot of time between June and December, and during that time frame numerous issues could potentially keep the Fed on hold even longer-perhaps until sometime in 2018.
You could even make the argument that the Fed could eventually be forced to begin lowering rates again. Either way, the decision by the central bank could have bullish implications for the gold market.
Stock valuations are-according to some analysts-severely stretched. The recent selling in technology shares could prove to be a shot across the bow for equity investors. In addition, the risk of recession also seems to be on the rise, and the combination of economic contraction along with a bear market in stocks could potentially keep the central bank on its toes. Either way, it does not seem that rates are going significantly higher any time soon.
Gold has been showing some impressive signs of strength recently, while stocks and some key economic data points have been showing some significant signs of weakness.
Now may be the ideal time to take stock of your portfolio, and to consider some diversification opportunities.
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Rates may stay low for some time, and stocks could be headed for a major multi-year bear market. Now is the time to get more diversified. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.Tags: advantage gold, Fed, fomc, gold, stock market collapse, treasury note