As predicted, the Federal Reserve raised interest rates this week by 25 basis points. Why, then, have precious metals’ prices seen gains when interest rate increases almost always correlate to price decreases?
This is what I’ve been contemplating this week. More often than not, interest rate hikes are due to market stability. And, market stability means fewer investors are buying safe haven commodities like gold and silver. So, if the market is strong, why are investors still largely purchasing precious metals?
I took to the wonderful wealth of information found online to discover why the discrepancy was occurring.
The last few weeks, precious metals’ prices have trended downward in anticipation of a minimum 3 federal interest rate hikes in 2017. We’ve heard it from every major news source. Traders have responded to the rumors, and commodities like gold have experienced price drops.
Although we’ve heard about the potential for 3 rate hikes, Wednesday’s FOMC meeting and Fed Chair, Janet Yellen’s comments have actually alluded to the possibility that the economy is stronger than thought, and 2017 might be less chaotic for precious metals. The dovish tone of the Fed was a surprise to traders, causing a gold rally this week. Many economists strongly believe 2017 will be quite bullish for gold, reaching $1400 by year’s end.
What do you think? Have precious metals’ prices caught you off guard this week like they have me? How do you plan to invest this year? I’d say we’re still in a great “buy” range for precious metals- specifically my favorite, silver.
If you haven’t already, check out the new Four Horsemen of the Apocalypse series! It is legitimately some of the coolest silver I’ve ever seen.
-J
