THE LAST GREAT GOLD BUYING OPPORTUNITY IS UPON US

Thursday, June 2, 2016
By Paul Martin

JOSHUA KRAUSE
THE DAILY SHEEPLE
JUNE 2, 2016

For the most part, the precious metal markets have been very kind to investors throughout 2016. Gold has made its first significant gains since the price began to tumble three years ago, and though silver has lagged behind gold, it has also risen in value. That is until a few weeks ago, when both precious metals started to lose their steam for reasons that were lost on layman precious metal investors.

It started to look like maybe these metals weren’t ready for another bull run after all. That perhaps, the impressive moves they’ve made in the last six months have been nothing more than a temporary market aberration. In reality, that couldn’t be further from the truth. If anything what we’re seeing is an opportunity in precious metals.

To understand why, you first have to realize that the recent price declines aren’t a random occurrence. Everything we’ve seen in the past month is directly related to the fact that the Federal Reserve has been talking about raising interest rates again.

Gold fell below $1,200 for the first time since mid-February on Monday, as comments from Federal Reserve Chief Janet Yellen on the likelihood of higher U.S. interest rates sent the dollar to two-month highs.

The Fed should increase interest rates in the coming months if the economy picks up, Yellen said on Friday, bolstering the case for a rate hike in June or July. St. Louis Fed President James Bullard said on Monday global markets appeared to be “well-prepared” for a summer rate hike.

An increase in U.S. rates would raise the opportunity cost of holding gold, which does not earn interest. It would also bolster the dollar, making gold more expensive for holders of other currencies…

For the past few weeks, various Fed officials have been quietly mentioning that they want to raise interest rates, and the gold market has responded accordingly. It makes sense.

People flock to gold when they don’t think their currency is going to hold its value. If interest rates are near zero, and the numbers in your bank account aren’t keeping up with inflation and rising costs of living, then there is no reason to save your money in that currency. If you want to preserve your earnings, you have to invest in something that will likely go up in value. If interest rates go up however, then keeping your dollars in the bank sounds safer than buying gold.

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