Rising Interest Rates Will Lower Stock Prices

Jon Banking, Economy, Fiscal Policies, Gold, Market Commentary, Politics, Precious Metals

As many expected, the Federal Reserve raised the benchmark interest rate to a range of 0.5% – 0.7%. During Janet Yellen’s announcement, she said rising employment rates among other measures have led to ‘considerable progress’ for the economy, adding she and her FOMC colleagues expected the economy to ‘continue to perform well.’ In response to the rate increase, gold prices began a steady decline beginning around 1 p.m. GMT at $1,161.84/oz. and ending the day at $1,141.77/oz.
Since the Nov 8 election, gold has been down 10%, but is currently up 6% up for the year, which began Jan 1, 2016, at $1,063.22/oz. After last year’s quarter point hike, a similar move south, finding support in mid-Dec at $1061.98/oz. and rallying to $1,230.85/oz. in Feb 2016. In a way, we’re seeing a similar reaction by the market, but there are important differences that show investors are misreading the implications of rising interest rates and Trump’s fiscal stimulus plan.

This post was published at Schiffgold on DECEMBER 15, 2016.