Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Interest Rate Hikes on the Horizon? Not Likely

Interest-Rates / US Interest Rates Apr 10, 2014 - 09:45 AM GMT

By: Matt_Machaj

Interest-Rates

Recent weeks were not bad for those gold investors’ hearts filled with golden hopes. The price of gold depends on many factors, but past patterns can give us important hints and suggest which of them are to be carefully studied and properly comprehended. If history were to teach us anything about gold’s past market values it would most primarily be the following: watch out for the feds! Wise observation of government policies is the main driving force for what is happening in the gold market (surely along with supply factors in the longer run). As we discussed a month ago, this is the main reason for the observed correlation between the gold price and the interest rates. Not because interest rates per se are always casually linked to the gold price. But because interest rates are a reflection of current government policies.


This time we are going back to the possible interest rate hike subject, so passionately and almost obsessively discussed in the media. Last time, since the major change of the Fed chairman, we have heard that interest rate hikes are far, far beyond the horizon. Despite this, most of us apparently believe that interest rates will sooner or later have to be raised to the pre-stimulus range. It is unclear and remains a big mystery when this is likely to happen. Lately more has been said by the Fed (Janet Yellen) about this mystery of raising interest rates at the moment. We will get back to this in few paragraphs, but let us will debate the initial point. Despite what many observers claim, it simply may not be the case that the Federal Reserve should raise the interest rates. Actually the United States may still stay and bathe in a slumpy recession-type of environment for years to come. And the interest rates may stay as low as they are right now without any hikes visible on the horizon.

How may one support this thesis? Isn’t it obvious that rates have to go up sooner rather than later? They may, but we refuse to simply take this for granted and echo that those hikes are coming closer and closer. Let us have a look at the case of Japan starting from the nineties, certainly a very good parallel of the United States right now. After a huge credit bubble that burst during the beginning of the 1990s, the real estate market collapsed along with the stock market. Debt stayed at record levels, and additionally, public debt also reached its highest peak in all of history. In these conditions the Bank of Japan started lowering the interest rate to absurdly low levels, of less than one percent. In the real terms the rates became virtually negative. This may have been understood as a temporary tool in order to support failing businesses. The raises of the interest rate were to happen one day. In the end it was not a temporary tool at all. It became permanent. Rates in Japan stayed low for a very significant period of time. They are still below one percent and have been staying at this level since 1995. 19 years and not much has changed. Japan is still in a way involved in the fight with the recession that started twenty years ago. The tools triggered back then are still in place today.

The same can happen with the United States.

Increases of the interest rates are not necessarily on the horizon. They can stay low for a very, very long time. Notice that they already stayed low for a relatively long time. Ben Bernanke set the interest rate close to the zero boundary at the end of 2008. They are staying at this level for a sixth consecutive year. Despite the fact that as soon as we reached a zero interest rate policy, experts started to debate when the time of reversal should come. Some of the optimists believed that it might happen within a few months. After a few quarters the story tends to come back like a boomerang. And as soon as it is about to hit, it disappears again.

It is really hard to remind oneself that for at least one year, no recognizable expert has shown up and tried to scare us about upcoming interest rate hikes. Although we do not believe that the USA will necessarily repeat Japan’s case, we refuse at the same time to take for granted that hikes are coming.

In our opinion investors shouldn’t take Federal Open Market Committee statements that seriously, because they can quickly change. Do not treat stated goals as binding, because usually something else is at stake other than what is stated in their goal.

What does it indicate to us about the currents of the gold market and government’s influence on it? Overall government spending, especially via the central banking system, is generally not decreasing and the Fed is making sure that banks can go on with pooling more funds into the broken financial system. Since this is about to be continued, it’s likely to have a continued positive impact on the price of gold and gold market in general. Of course, not necessarily right away, but we are very likely to see gold higher in the coming years.

The above s based on the April gold Market Overview report. We encourage you to subscribe and read the full version today.

Thank you.

Matt Machaj, PhD

Sunshine Profits‘ Contributing Author

Gold Market Overview at SunshineProfits.com

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Matt Machaj, PhD and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matt Machaj, PhD and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Matt Machaj, PhD is not a Registered Securities Advisor. By reading Matt Machaj’s, PhD reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Matt Machaj, PhD, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in