It’s been a tough week for gold bulls of all stripes. Gold prices today (Friday) are mostly flat, up just 0.62% in afternoon trading.
This week, the Fed went ahead and raised rates by 0.25%. No surprise there. Effectively, the fed funds target rate has now moved up to a range of 0.5% to 0.75%.
While the Fed did follow through with an increase, keep in mind that these rates are low. Historically, they’re still extremely low.
Nonetheless, the short-term reaction in gold prices has been negative.
Up until the Fed’s rate hike announcement was official, the price of gold was still trading at $1,161 an ounce. Within just two hours, it had dropped to $1,142, then fell a little further on Thursday. As I write, gold is down by another $12 to $1,130, losing 17% since peaking this summer.
Existing bonds, which already pay a fixed coupon, are in a challenging environment, too, because increasing rates compete with them. So long-term bonds are tanking and have been since July.
This post was published at Wall Street Examiner on December 16, 2016.