This is why I am always critical of our Federal Reserve Committee.
Are we that gullible that some of us believed that the FED was telling us the truth at the last FED meeting, that 4 rate hikes were in the cards in 2016? Only to come out now and say we only expect 2 rate hikes this year. I’m sorry, since low interest rates and a weaker dollar are the main driver of higher gold prices, why don’t they just come out and say they are not sure how many rates hikes will happen in 2016? BE HONEST! BECAUSE YOU REALLY DON’T KNOW. All they have to do is look out the window and they’ll see negative interest rates popping up all over the globe.
Within an hour of hearing on Wednesday that the FED was only predicting possibly 2 rate hikes instead of 4, gold rallied over $32 dollars. Everyone knows that the FED needs to be transparent and by allowing each FED governor to share their opinions (which creates uncertainties between meetings) is a terrible strategy and only causes more volatility in the markets. By the way, three FED Governors are scheduled to speak today.
Anyway, case in point, a $32 dollar rally in the price of gold and a 6 percent increase in the price of oil in AN HOUR.
Oil trading at $ 42 dollars and a stronger dollar this morning putting pressure on the yellow metal. Silver seems to be in a world of her own enjoying her sweet 16 party, but the party might just be ending soon.
So now that the excitement is over, we will let the market dictate the direction of the price of gold and not the Federal Reserve.
Author Name: Walter Pehowich
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