“Ignore The Noise” & Focus On The Fact That Central Banks “Remain Extremely Accommodative”

Wednesday, October 28, 2015
By Paul Martin

By: GoldCore
GoldSeek.com
Wednesday, 28 October 2015

The primary focus this week is again on the “all powerful” Fed. If the Fed leans toward a rate hike in December, gold could come under pressure again in the short term. However, if it leans toward raising rates next year, then gold would be expected to eke out further gains.

Bank of England – Interest Rates – 1694 to Today

Most physical buyers will ignore the noise and focus on the fact that the Fed’s monetary policies, along with the Bank of England, the ECB and most central banks in the world, remains extremely accommodative.

The perception and narrative is that a rise in rates, even by a very marginal 25 basis points will be negative for gold. This may be true in the short term as perception, even misguided perception, can drive markets in the short term.

However, rising interest rates per se are not negative for gold. What is negative is positive real interest rates and yields above the rate of inflation. This is unlikely to be seen any time soon.

Gold will also be vulnerable towards the end of an interest rate tightening cycle as was the case in January 1980. Today, central banks including the Fed are having difficulty raising interest rates in even a small nominal way.

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